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price difference between spot and futures

  • Post #1
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  • First Post: Oct 21, 2011 3:34pm Oct 21, 2011 3:34pm
  •  junkone
  • | Joined May 2008 | Status: Member | 128 Posts
i am watching eur.usd idealpro and M6E Dec contracts with IB.
eur.usd is now @ 1.3869 and spread of half pip
M6E DEC contracts are 1.3860 with 4 pips spread.

why is there this difference.
  • Post #2
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  • Oct 21, 2011 4:57pm Oct 21, 2011 4:57pm
  •  CodeMeister
  • Joined Sep 2009 | Status: Making Code While Making Pips | 1,672 Posts
A lot can change between now and December. I used to know the term, but can't think of it right now. To understand my point, take a look at Oil futures for 1 month, 1 year and 10 years.
 
 
  • Post #3
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  • Oct 21, 2011 5:07pm Oct 21, 2011 5:07pm
  •  junkone
  • | Joined May 2008 | Status: Member | 128 Posts
what does the market uncertainity got to do with a spread when the spot spread is tight.
 
 
  • Post #4
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  • Oct 22, 2011 2:33pm Oct 22, 2011 2:33pm
  •  enivid
  • Joined Aug 2009 | Status: Member | 461 Posts
So your question is why there's a difference in spread, not why there's a difference in price? The spread depends on the market liquidity and the amount of sellers and buyers. The less liquid is the market, the higher will be the spread, as there will be a lot of price levels with no buyers/sellers wishing to buy/sell on them.
 
 
  • Post #5
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  • Last Post: Oct 26, 2011 12:11am Oct 26, 2011 12:11am
  •  greatpips
  • | Commercial Member | Joined Oct 2011 | 21 Posts
Spreads depend on the liquidity of the asset/currency. Oil is the perfect example closely followed by the USDYEN movements for the last few weeks.
But for tighter spreads and more accurate quotes, you may want to opt for ECN trading [I use tradersway ECN platform and two others] and have access to interbank quotes, tighter spreads, etc.
But here's the kicker, even with access to interbank quotes, if liquidity is AWOL, the spreads will start to widen..
 
 
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