How to use Spread Order

Hi All,

Can anyone please guide me how to use the Spread on the following example.

Assume, Now BankNifty is @ 18400,

May BNF Futures @ 18381 and

June BNF Futures @ 18404

BankNifty15MAY15JUNFUT is Ask Rate - 26 and Bid Rate - 24.70

Now I thought BankNifty will go down from 18400 to 18300, then what should I do. Either Sell May & Buy June or Buy May or Sell June. How to decide which one to choose.

Please guide me.

When you trade the spread, you are betting on whether the difference between May/Jun increased or decreases.

If you feel that Bank nifty is going lower, the trade is to short Bank nifty futures. May futures if you think it will happen by May expiry, or June futures if you think it will take longer.

If you want to trade the spread, assuming you think that the spread is going to go up from the current around Rs 25, you just buy the spread directly at the ask rate (26). If the spread indeed goes up, you can sell it at higher level (say 30) and make the Rs 4 as profit. If spread goes down you make a loss.

If you think Spread is going to go lower, just short the spread directly.

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