Understanding spread trading & fair future price calculation?

General
1

i have studied module 4 futures trading from varsity.

below are some question:-

  1. CAN SPREAD TRADING BE DONE IN CURRENCY & COMMODITY AS WELL ?

  2. IN CASE OF DOING SPREAD TRADING BETWEEN SPOT SCRIPT & FUTURE SCRIPT , IS IT POSSIBLE TO DO SPREAD TRADING BETWEEN 2 SEPERATE FUTURE SCRIPTS ALONE ?

IF YES

  1. WHEN DOING SPREAD TRADING BETWEEN SPOT SCRIPT & FUTURE SCRIPT , WE USE “SPOT PRICE” IN FUTURE PRICE CALCULATION … WHEN WE WISH TO DO SPREAD TRADING BETWEEN 2 FUTURE SCRIPTS ITSELF , DOES THE FORMULA STAY THE SAME OR WE REPLACE IT WITH “EARLY EXPIRING FUTURE SCRIPT” ?

  2. WHY SHOULD WE SQUARE OFF BOTH POSITIONS BEFORE EXPIRY ? WHAT HAPPENS IF EXCHANGE SQUARES THEM OFF AT CLOSING TIME ?

2

  1. yes spread trading can be done in currency and commodity markets as well

  2. you can not use spread for different future scripts

  3. If you do not clear the position

If it is currency exchange will settle.

If it is MCX, In Commodities there are two types of contracts deliverable and non deliverable contracts

If it is non deliverable contracts exchange will settle

if it is deliverable contracts (like gold , silver) you have to take physical delivery with complete margin or else exchange will penalize .

3

additional questions :-
can’t i do spread trade betwen say USD DEC 15 FUT & USD JAN 16 FUT , provided opportunities arrive ?
4. deliverable contracts like gold & silver , i need to take physical delivery … please explain in more detal