Implieds help

[arbtrader]

I'd be very grateful if someone could give me an introductory explanation to the world of "implieds" and how and why these are important in scalping spreads.

I'd be especially interested in understanding implied IN, implied ON, implied OUT and implied-on-implied prices (if this is different from implied on).

I've done some googling but dont really understand what I'm reading as I havent been able to find a real intro to these terminologies.

Any assistance or pointers to additional reading will be greatly appreciated.

 

[compaq]

sorry for the late reply. hope you are still trading spreads.

my understanding of the implieds (from trading both euribor and short sterling spreads) is the extra amount that the volume in the spread book places into the bid and offers in the outright markets contracts. for instance, consider the h6/u6 spread that has prices (and sizes in brackets) of 95.540 (1000) bid at 95.550 (1000) for the march contract and 95.540 (500) bid at 95.56 (500) for the sep contract (leaving 95.55as the middle price). In the spread book/matrix the spread is -0.01 (500) bid at 0.01 (500), leaving 0.00 as the middle price. Now, say some one bids 500 h6/u6 spreads at 0.00 this would automatically offer out 500 lots of sep at 95.55 on an implied basis. the order for the 500 sep has not entered the market via the outright market, instead it has entered the market via what the spread book is implying.

This is a very simplistic example, I hope that it helps.