Spreads value problem

[FTSE Beater]

Hi All

Here's an odd question for you. I'm trying to trade S K4 - C K4
Both contracts are valued at $50 per unit move

Soybeans = 8180
Corn = 2684
Spread = 5496

Now, the spread moves from 5496 to 5497 does that mean it's a $50 move. If so it seems very large

Any help is much appreciated

 

[donaldduke]

Im getting a quote from my SB firm 265.5 (corn)
and 801.5 (soya)

So a one decimal point move is only $5

 

[Andreas]

A one cent move in this spread is $50. The spread moves, just like the two legs of it, in 1/4 cent increments. So in increments of $12.50.
Bear in mind that in the 4 digit quote notation 8182= 818 1/4, 8184=818 1/2, 8186= 818 3/4, the next is 8190

 

[FTSE Beater]

Hi Andreas

So a spread move from 5496 to 5497 is worth $5? (if it could happen)
...and a move from 5496 to 5506 is $50

 

[Andreas]

It will never move from 5496 to 5497. As a matter of fact in this notation 5497 does not exist. The increments are in 1/4 cents (minimum move up or down $12.50), so in this notation you can only see 0, 2, 4, or 6 as last digit. A move from 5496 to 5506 is a move of 1 cent, so you are correct that it is a $50 move.

Best regards,
Andreas

 

[FTSE Beater]

Hi Andreas

Thanks for that
Here's the chart I'm trading if your interested

S K4 - C K4
Chart courtesy of www.MRCI.com

 

[Andreas]

Spread has been in a long uptrend. Looks a bit toppy now. You might want to watch the negative divergences with Slow Stoch and RSI. From what I saw on the board today it is still going your way.

Good trades, and best regards,
Andreas