Outright Futures refer to a simple futures contract, where a trader buys or sells a single futures contract with a specific maturity date.
The example demonstrates a simple buy order for a futures contract, specifying the symbol (e.g., ES for S&P 500 E-mini), the contract month/year, the quantity, and the price.
Example FIX Message
8=FIX.4.2|9=176|35=D|49=BUYER|56=EXCHANGE|34=2|52=20230727-19:00:00.000|11=12345|21=1|40=2|44=100.25|54=1|38=10|55=ES|167=FUT|200=202512|10=128|
35: MsgType ('D' for New Order Single)
55: Symbol (Futures symbol, e.g., 'ES' for S&P 500 E-mini)
200: MaturityMonthYear (Futures contract month and year)
Futures Spread involves simultaneously buying and selling two related futures contracts. This strategy aims to profit from the difference (spread) between the two contracts.
Example FIX Message
A spread order involves a bit more complexity due to the multiple legs of the trade. This is often represented using a combination of tags:
8=FIX.4.2|9=283|35=AB|49=TRADER|56=EXCHANGE|34=2|52=20230727-19:00:00.000|11=12346|21=1|40=2|44=5.50|54=1|38=10|55=ESZ3-H4|167=SPREAD|200=202312|15=USD|555=2|600=ES|602=FUT|608=202312|624=0|637=10|600=ESH4|602=FUT|608=202403|624=1|637=10|10=091|
35: MsgType ('AB' for Multi-leg Order)
55: Symbol (Composite symbol for the spread, e.g., 'ESZ3-H4')
167: SecurityType (Security type, 'SPREAD' for spread order)
200: MaturityMonthYear (Futures contract month and year for the spread)
15: Currency (Currency of the trade)
555: NoLegs (Number of legs in the order, '2' in this case)
600: LegSymbol (Symbol of the near leg, 'ES')
602: LegSecurityType (Security type for the near leg, 'FUT')
608: LegMaturityMonthYear (Maturity month and year for the near leg, '202312')
624: LegSide (Side of the near leg, '0' for Buy)
637: LegOrderQty (Order quantity for the near leg, '10')
600: LegSymbol (Symbol of the far leg, 'ESH4')
602: LegSecurityType (Security type for the far leg, 'FUT')
608: LegMaturityMonthYear (Maturity month and year for the far leg, '202403')
624: LegSide (Side of the far leg, '1' for Sell)
637: LegOrderQty (Order quantity for the far leg, '10')
Long Position on the Near Leg / Short Position on the Far Leg:
Definition: When you buy the near leg (shorter expiration) and sell the far leg (longer expiration), you are essentially going long on the near leg and short on the far leg.
Term: This position is generally referred to as a "bull spread" or a "calendar spread".
Bull Spread: This term indicates that you are taking a bullish stance on the near leg relative to the far leg. You expect the near leg to outperform or appreciate more than the far leg.
Scenario
Near-Term Contract: December 2024
Far-Term Contract: March 2025
Position
Buy the Near-Term Contract (Long December 2024)
Sell the Far-Term Contract (Short March 2025)
Market Expectation
You expect the price of the December 2024 contract to rise relative to the March 2025 contract.
Illustration
Buy December 2024 at $100.
Sell March 2025 at $105.
If the spread narrows (e.g., December 2024 rises to $102 and March 2025 remains at $105), you profit from the increase in the near-term contract's value relative to the far-term contract.
Short Position on the Near Leg / Long Position on the Far Leg:
Definition: When you sell the near leg (shorter expiration) and buy the far leg (longer expiration), you are going short on the near leg and long on the far leg.
Term: This position is generally referred to as a "bear spread" or a "reverse calendar spread".
Bear Spread: This term indicates that you are taking a bearish stance on the near leg relative to the far leg. You expect the near leg to underperform or depreciate more than the far leg.
Scenario
Near-Term Contract: December 2024
Far-Term Contract: March 2025
Position
Sell the Near-Term Contract (Short December 2024)
Buy the Far-Term Contract (Long March 2025)
Market Expectation
You expect the price of the December 2024 contract to fall relative to the March 2025 contract.
Illustration
Sell December 2024 at $100.
Buy March 2025 at $105.
If the spread widens (e.g., December 2024 falls to $98 and March 2025 remains at $105), you profit from the decrease in the near-term contract's value relative to the far-term contract.