Order Execution

What this video covers

• What a futures spread actually is: a long position in one contract and a short position in a related contract held simultaneously, not two directional bets in the same direction
• Why broad market moves cancel across the two legs, leaving the trader exposed only to changes in the price gap between them
• How a futures straddle differs from an options straddle: in futures, a straddle is simply a spread (long one contract, short a related one), not a same-strike call plus put
• How spreads are quoted as a price differential between the two legs, not as two separate outright prices, and why the trader cares about the gap, not the individual contract levels
• What legging risk (execution risk) is, and why placing two separate outright orders one at a time reintroduces the naked directional exposure the spread strategy is designed to avoid
• Why a single spread order fills both legs simultaneously at the specified differential, eliminating the danger that the second leg slips to a worse price before the position is complete
• How spread margin is significantly lower than the sum of two outright margins because the Clearinghouse recognizes the reduced risk from offsetting legs, not because of any exchange discount or promotional rate