Orders and Execution · Futures Trading Guide
A spread can be executed as a recognised combination or assembled one leg at a time. The choice affects exposure while the trade is being established.
Identify the actual combination
A recognised spread order specifies the component contracts, maturities, directions and ratio. Its quote usually describes a relationship between leg prices. Check the venue’s sign convention before deciding whether buying the displayed spread creates the exposure you intend. A broker screen can express the same relationship in a different order.
Understand legging risk
Suppose the plan is to buy a nearby contract and sell a later contract. You buy the nearby leg at 100, but before the second order fills, the later contract drops from 103 to 101. You have acquired the spread at a less favourable relationship than expected. Until both legs are established, an outright exposure exists. An intended neutral trade can therefore begin with directional risk.
Use a combination without assuming perfection
An exchange supported spread order can reduce the interval between leg executions under its matching rules. Availability, implied liquidity, partial fills and protection mechanisms remain product specific. A limit on the spread price controls the acceptable relationship, but does not guarantee a fill. Fees commonly apply to both legs, and margin offsets are conditional rather than a permanent entitlement.
Reconcile every component
After execution, verify leg quantity, direction, month, fills and total cash risk. Use the broker’s reported allocation of leg prices to reconcile statements while assessing the net spread paid. If one leg is rejected or remains open, follow a predefined completion or reduction plan. Do not increase the second leg simply to compensate for an unexpected loss without reassessing the entire position.
Try it yourself
A planned one by one calendar spread has two nearby contracts filled but only one later contract filled. What exposure remains?
Show the worked answer
One matched calendar spread plus one unpaired nearby contract. The unpaired contract carries additional outright exposure until addressed.
Further reading
Educational material. Prices, margins and strategy examples are hypothetical unless explicitly identified as contract specifications. They are not trade recommendations. Futures losses can exceed deposited collateral. Product terms and eligibility vary by venue and jurisdiction.
