What is a Spread order and how is it useful?

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spread is to “roll over” an expiring position into the future when FUT contract expires the seller has to give some qty to the buyer, it will be more benifit to both seller & buyer, at the time of taking delivery of the stocks,

if anyone knows more about this plz let me know :slight_smile:

Spread orders are typically used to enter spread positions of upto 3 legs. For example an option strategy like the Butterfly, where you need to enter into 3 different contracts at the same time. If you use normal buying/selling order, you will have to enter each position individually and you risk the price going against you. If you are using a spread order, you can place all the 3 orders at one time, ensuring that your orders gets executed only if the prices are available. 

Check this post on how to place Spread orders

A spread order is a trading strategy which involves going long (buying) in one contract whilst shorting (selling) another contract of the same or different underlying. Spread orders are normally executed in the F&O segment and look at capitalizing on the difference between the prices of the executed legs referred to as the "Spread".

NSE provides trading the "Spread contract" which is the difference between 2 months Index contracts trading on NSE. You can either buy or sell a spread based on your view whether the spread difference will widen or narrow. The margins required for a spread contract is relatively lower because any change in market dynamics will affect both legs similarly.

The different types of spread trades are:

a) Calendar Spread: Involves entering into long & short position of the same underlying asset with 2 different expiry periods.

Eg: Assume Nifty Jan Futures is trading at 6150 and Feb Futures is at 6190 [difference between the 2 contracts being 40 points] you could short Nifty Feb Futures and buy Nifty Jan Futures. Any reduction in this difference would be profitable and vice versa.

b) Inter commodity spread: Trading and trying to cash in on the difference between 2 closely derived Commodity contracts. For eg: A 'Crack Spread' which involves purchasing crude oil futures and taking an offsetting position by refined products of crude oil like gasoline, diesel etc.

c) Option spreads: Involves a combination of two or more different option strikes in forming a strategy which involves limited risk.

Credits:  http://en.wikipedia.org/wiki/Spread_trade


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This is a completely wrong answer, Prasad!

in “spread order” :
(1) either all orders get execute or all reject ?
(2) some order can execute and some order can get reject ?
(3) the executed order can be in full quantity only ; partial quantity execution will not happen in that ?

what is the correct answer from the above 3 scenario ?

Nothing as such.

This can happen, your one order can get executed while other can get rejected.

Futures and Options are traded in lots. If you put Limit Order for say 5 lots if the scrip is illiquid, there can be a scenario where 4 lots gets executed and order for 1 lot will remain pending due to lack of sellers at that price.