Calendar Spread Futures

Abstract

A calendar spread futures contract is a forward contract on the intermonth spread of futures contracts. The calendar spread futures contract can be independently traded and accounted for independent of the traditional roll periods of the complementary futures contracts. An open interest holder can hedge against price volatility in the related futures contracts that may occur prior to or during the roll period. In other words, the calendar spread futures contract locks in the current spread between the front-month contract and the first-deferred contract. Buying a calendar spread futures control is equivalent to buying the spread difference between the expiring contract and the second expiry. Selling a calendar spread futures contract is equivalent to selling the spread difference between the expiring contract and the second expiry.

We claim: 
     
         1 . A method of trading calendar spread futures contracts on an exchange by operating a trading engine of the exchange, the method comprising:
 defining, using a processor, a calendar spread based on a first futures contract with a first delivery date and a second futures contract with a second delivery date;   listing, using the processor, a calendar spread futures contract based on the first delivery date and the second delivery date; and   offering, with the trading engine, the calendar spread futures contract in combination with an offsetting position in the first futures contract.   
     
     
         2 . The method of  claim 1 , wherein the calendar spread is defined by a long position in the first futures contract. 
     
     
         3 . The method of  claim 1 , wherein the calendar spread is defined by a short position in the first futures contract. 
     
     
         4 . The method of  claim 1 , wherein the first delivery date is the next available delivery month and the second delivery date is the first-deferred delivery month 
     
     
         5 . The method of  claim 1 , wherein an underlying asset of the first futures contract is a Treasury note, a Treasury bond, or a commodity. 
     
     
         6 . The method of  claim 1 , the first delivery date is the second-deferred delivery month and the second delivery date is the third-deferred delivery month. 
     
     
         7 . The method of  claim 1 , further comprising:
 executing a trade of the calendar spread futures such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.   
     
     
         8 . The method of  claim 7 , wherein a mark-to-market position in the calendar spread futures contract recorded in the trading accounts of the first entity and the second entity. 
     
     
         9 . An apparatus for trading calendar spread futures contracts on an exchange by operating a trading engine of the exchange, the apparatus comprising:
 a memory configured to store a calendar spread listing based on a first futures contract with a first delivery date and a second futures contract with a second delivery date;   a interface configured to receive a first request from a first entity to buy a spread difference between the first futures contract and the second futures contract and receive a second request from a second entity to sell the spread difference between the first futures contract having the first delivery date and the second futures contract having the second delivery date; and   a processor is configured to execute a trade of a calendar spread futures contract by matching the first request and the second request such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract   
     
     
         10 . The apparatus of  claim 9 , wherein the processor is configured to list a calendar spread futures contract based on delivery dates. 
     
     
         11 . The apparatus of  claim 9 , wherein the calendar spread is defined by a long position in the first futures contract. 
     
     
         12 . The apparatus of  claim 9 , wherein the first delivery date is the next available delivery month and the second delivery date is the first-deferred delivery month 
     
     
         13 . The apparatus of  claim 9 , wherein an underlying asset of the first futures contract is a Treasury note, a Treasury bond, or a commodity. 
     
     
         14 . An apparatus comprising:
 a memory configured to store a calendar spread based on a first futures contract with a first delivery date and a second futures contract with a second delivery date; and   a processor configured to list a calendar spread futures contract based on the first delivery date and the second delivery date and offer the calendar spread futures contract in combination with an offsetting position in the first futures contract.   
     
     
         15 . The apparatus of  claim 14 , wherein the calendar spread is defined by a long position in the first futures contract. 
     
     
         16 . The apparatus of  claim 14 , wherein the calendar spread is defined by a short position in the first futures contract. 
     
     
         17 . The apparatus of  claim 14 , wherein the first delivery date is the next available delivery month and the second delivery date is the first-deferred delivery month 
     
     
         18 . The apparatus of  claim 14 , wherein an underlying asset of the first futures contract is a Treasury note, a Treasury bond, or a commodity. 
     
     
         19 . The apparatus of  claim 14 , the first delivery date is the second-deferred delivery month and the second delivery date is the third-deferred delivery month. 
     
     
         20 . The apparatus of  claim 14 , wherein the processor is configured to execute a trade of the calendar spread futures such that the first entity holds a long position in the calendar spread futures contract and the second entity holds a short position in the calendar spread futures contract.