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Spot vs Futures - Help Needed


Guest Tigerflow

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Guest Tigerflow

Hi,

I have a cfd account and I'm new to trading commodities and wondered if it's better to trade Palladium June contract with a 2 point spread or Palladium Spot with a 7 point spread but no expiry? I like the idea of no expiry but am worried that I'm not seeing all the pros and cons due to my trading inexperience. 

 

 

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Hi @Tigerflow,  it sounds like you've got that round the wrong way. The spot market should have the tighter spread while the futures contract should have the larger spread. The reason being is the the spot market will charge overnight funding to go long each day whereas this charge is built into the futures spread. So if you are expecting to hold the trade open for a considerable length of time the futures contract is the more cost effective but for a trade of short duration the spot contract is more cost effective.

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Guest Tigerflow

Hi Caseynotes,

Thanks for your reply but my IG Platform shows Spot Palladium as 1540.5-1547.5. Seven point spread.

And my June Palladium as 1503-1505. Two point spread.

Am I missing something? 

 

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HI @Tigerflow,  ok, just looking and see the March contract which is about to rollover has been taken off so the next is June 19, I'm not familiar with the palladium market but the June price seems a very long way from the spot price so I'm presuming that has something to do with it. Check out some of the other spot vs futures prices and see what I mean.

Also, have a look at the video on this linked page comparing spot (dfb)  and futures.

https://www.ig.com/uk/glossary-trading-terms/futures-contract-definition

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