Chapter 5 of 8
Calendar spreads and rolling futures
Separate the price of each leg, the change in their difference, roll costs and changing margin offsets.
In this chapter
A spread trades a relationship #
A calendar spread combines contracts on a related underlying with different expiries. One leg may be long and the other short. Its economic behavior depends on how the two prices move relative to each other, not only on the direction of the underlying market.
Write both legs explicitly. A phrase such as buying the spread is ambiguous unless the convention identifies which expiry is bought and which is sold. Different platforms can display the spread with different signs.
Rolling is two transactions #
To continue an exposure beyond a contract’s life, a participant generally closes or settles the near contract and opens a later one. The prices differ, and both transactions can incur spread, slippage and charges. A continuous chart does not perform those cash transactions for the user.
The cost or benefit of a roll depends on the existing position, the curve and the chosen convention. The term roll yield should not be used as a guaranteed return independent of the full exposure.
Offsets and execution can change #
A clearing model may recognize an offset between legs, but the benefit is conditional on the product, expiry and current rules. It can change near expiry. Removing a hedge leg first can temporarily leave the other leg with a much higher margin requirement.
The 2026 SEBI single-stock calendar-spread review is linked with this module because generic margin summaries can lag circulars. Check the operative rule for the exact product and date; do not assume index and single-stock expiry-day treatment are interchangeable.
Decision lab: A spread position can lose offsets and liquidity #
Two futures expiries create a relative-price position, but each leg still has execution and funding mechanics. A theoretical spread can be temporarily broken while rolling, and offset treatment may change with expiry or an applicable rule.
Model one leg filling and the other remaining unfilled. Compare the resulting directional exposure with the intended spread. Record contract-specific settlement dates and current offset terms separately; do not freeze a screenshot’s margin benefit into every later session.
Hypothetical worked example
Both futures rise while the spread loses
Consider long one far-month fictional future at 110 and short one near-month future at 100, each with multiplier 50. The initial far-minus-near difference is 10.
Later, the far future is 114 and near future is 106. The long leg gains 4 × 50 = ₹200, while the short loses 6 × 50 = ₹300. Net result is −₹100, equal to the spread narrowing by 2 × 50.
A view that both prices will rise was insufficient to describe this position. Funding and execution of the individual legs are additional questions, not captured in that −₹100 result.
Common mistakes
- Treating a spread as if only one leg’s direction matters.
- Assuming a margin offset remains available through every expiry event.
A long far/short near spread benefits from which change, other things equal?
Make this chapter useful
Can you defend the reasoning?
Before moving on, answer the self-check in your own words and write why each alternative fails. Use the worked example to test that explanation. Then apply it in the module research task; keep the assumptions and the evidence that could change your answer.
Sources and further reading
- NSE individual-security derivatives specifications ↗
- NSE Clearing: settlement mechanism ↗
- NSE Clearing: equity derivatives margins ↗
- NISM: Research Analyst learning topics (scope reference; independent lessons) ↗
- India Meteorological Department: monsoon information ↗
- MCXCCL: physical delivery FAQs ↗
- NSE: company integrated financial filings ↗
- FRED / EIA: Brent spot price DCOILBRENTEU ↗
Further-reading references from the curriculum source list. Contract sizes, expiry calendars, settlement references, margin parameters and tax treatment can change; verify the current operative documents for the actual product. Worked figures are illustrative, not current quotes.
Progress is stored only on this browser.
Back to Futures · Learning library · Calculators
General financial education. No securities recommendation, assured outcome or personal advice. Read the risk disclosures.