Crypto Futures Calendar Spreads: Construction, Pricing, and Execution Risks
Summary
A futures calendar spread pairs equal-sized long and short contracts on the same asset with different settlement dates. The article explains how buying a spread means going long the nearer expiry and short the farther one, while selling reverses those legs. It defines contango and backwardation, and distinguishes calendar spreads from spot-futures carry trades. A Bitcoin example illustrates tracking the price difference between two expiries and describes holding to settlement, closing when the spread changes, or rolling the position forward.
The strategy can reduce exposure to broad moves in the underlying asset, but it is not risk-free or guaranteed to be market neutral: spread prices can move, leverage can trigger liquidation, and asynchronous fills can leave a directional position. The article discusses simultaneous execution through a block trading RFQ workflow as one way to limit legging risk. Its numerical example is hypothetical, and it does not provide empirical performance, fee, funding, or margin analysis; the suggested behavior of spreads in different market conditions should therefore be treated as general guidance rather than a reliable forecast.
Key ideas
- A calendar spread combines opposite positions in the same underlying with different expiry dates and matched quantities.
- Buying a spread typically means buying the near contract and selling the farther contract.
- The spread’s changing price, rather than the outright asset direction, drives the position’s profit and loss.
- Leverage, liquidation, and one-sided fills can undermine the intended reduction in directional exposure.
- Rolling a spread replaces the expiring near leg to maintain exposure across settlement dates.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.