Spread Crude Oil contract specification

Spread contracts allow a member to execute two trades simultaneously in two different maturity contracts of the same commodity, by entering a single order. In other words, by trading in the spread contracts, a member takes two separate positions by entering one order, resulting in two trades, one in the near month contract and the other in the far month contract. This is used for the purpose of rolling over positions from one contract to another. 

The salient features of the spread contracts are as follows:

(i) Spread contract allows a member to shift / roll over his position from one maturity month to another. For instance, Ref Soy Oil May June 2005 Spread contract allows a member to shift his position from May 2005 futures contract to June 2005 futures contract.

(ii) Buying a spread contract implies selling near month futures and buying far month futures. Similarly, selling a spread contract means buying near month maturity contract and selling far month futures contract.

(iii) The price of the spread contracts would be derived by the price at which the holder of long and short positions are willing to carry over/spread their positions from near month to far month. The Spread price can be positive, negative or zero. In other words, the spread between May 2005 and June 2005 Soy contract can be positive, negative or zero. 

(iv) A spread order, once executed, results into trades in two corresponding futures contracts. In the near month, the trade is generated at the previous closing price, while in the subsequent month, it is generated at spread + near month’s previous closing price. Since trades from spread contract are automatically transferred to near month and far month contracts on its execution, there will not be any open position, margining or daily net obligation in the spread contract.

1) The instrument type of Spread Contract will be ‘Futures’.

2) The base price of spread contract will be zero. The daily price range (DPR) will be defined as flat value. For example, if the flat DPR is set as Rs. 50/-, then the DPR would be –50/- to +50/-.

3) Validity of the spread orders will be DAY order, EOS (end of session) IOC (immediate or cancel).

4) Valuation of the trades will be done as under:
Near Month = Quantity x Previous Close Price of Near Month Contract 
Far Month = Quantity x (Previous Close Price of Near Month + Spread Price)
If the previous close price is not available, then the system would take the base price of the contract as close price.

5) Trades done on account of spread contract will form part of the volume, value, open interest and no. of trades of the Near Month and Far Month Contracts. It will not form part of Near Month and Far Month Contract Average Trade Price (ATP) computation.

6) The spread contract will have its own Open price, High price, Low price, Last Traded Price (LTP), Last Traded Quantity (LTQ), Volume, Value, Last Updated Time (LUT), Last Traded Time (LTT), % Change and Average Traded Price (ATP). 

7) Open interest will neither be computed in case of Spread Contract nor be displayed in the market watch.

8) Life time high Open Interest and Life time low open interest for spread contract will also not be computed. Life Time High would be same as the High price for the day and Life Time Low would be same as Low price for the day.

9) The bhav copy (daily price list) is not generated for the spread contracts.