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Spread Contracts

September 18, 2009

ssss Introduction

The National Stock Exchange Ltd (NSE) in its yet another initiative have launched
Spread contracts with effect from September 8, 2009 in Index futures and from
September 17, 2009 in single stock futures.

Spread Order functionality

In spread order functionality, the dealer can set up the spread combination for
individual contracts on Market Watch and place Buy Spread order (BSP) and Sell
Spread order (SSP) with individual contracts defaulted for LEG1 and LEG2.

In other words if a trader wants to take an off setting position in two expiries he
can enter a spread order for the difference and a simultaneous trade in the two
months contracts.

Benefits

Rollover benefit: Spread order functionality would be quite useful when


positions require a rollover. Desired BSP/SSP needs
to be put into the system and position would be
netted
Impact Cost: Spread order functionality will help in reducing impact
cost as number of order to be placed will reduce to
one
Demand and Supply : One can rollover the position in efficient manner by
gauging the demand and supply between spread

Key Points

The Lot size of spread contracts is similar to that of the underlying contract
Spread order can be initiated only in same securities but different expiry
(Current-Mid, Mid-Far, Current-Far) for Nifty and (Current-Mid and Mid- Far) for
the Single stock futures
Since Spread order functionality is available only for Future- Future trade, Cash-
Future arbitrage can not be done.
When the spread is traded, assignment happens at the LTP of the current month
contract plus the spread price

Market Watch

Karun Mutha
Sr. Vice President& Head Derivatives
Tel +91-22-67897833
Email: Karun.mutha@hsbcinv.com

Tina Khetan
Analyst - Derivatives
Tel +91-22-67897828
Email: Tina.khetan@hsbcinv.com

MW- 1
Page 1
Spread Contracts
September 18, 2009

ssss
MW- 1 depicts how a spread contract for Nifty appears. There are three spread
contracts i.e. Sep/ Oct, Sep/Nov and Oct/Nov available for trading currently

MW- 2

MW 2 depicts BSP (Buy spread order) using F1 key. One can buy October contract
and Sell September contract. Similarly by using F2 function one can place SSP
(Sell spread order)

MW- 3

MW- 3 depicts spread contract for Stock Future- Tata Motors. We can place spread
order with negative price too. Thus future contracts which are quoting at a
discount can also be rolled over with a negative carrying cost.

Page 2
Disclaimer:
Issuer of the Document:- HSBC InvestDirect Securities (India) Limited*
Registered Office:-
Dhana Singh Processor Premises
J B Nagar, Andheri - Kurla Road
Andheri (East)
Mumbai – 400 059
Telephone: +91 22 6789 7830
Fax: +91 22 6789 7700
Website: www.hsbcinvestdirect.co.in

Disclosure
HSBC InvestDirect Securities (India) Limited (“HISL”), its associate and group companies, its directors, associates and employees may
have various positions in any of the stocks, securities and financial.
Instruments dealt in this document or may make sale or purchase or other deals in the securities from time to time or may deal in other
securities of the companies / organizations described in this document.

Certification
The views and opinions expressed by the author in the document are his own and do not reflect the views of HSBC InvestDirect
Securities (India) Limited or any of its associate and group companies.

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* Formerly known as IL&FS Investsmart Securities Limited

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