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Key Financial Market Concepts, 2nd Edition by Bob Steiner

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Spread, Butterfly Spread and Condor

Definition

In general, a spread is any trading strategy in which a trader buys one instrument and sells another, related instrument, with a view to profiting from a change in the price difference between the two. In particular, a futures spread is the purchase of one futures contract and the sale of another; a FRA spread is the purchase of a FRA for one forward-forward period and the sale of a FRA for a different period.

A butterfly spread is the simultaneous purchase of one futures contract, sale of two of the subsequent contract and purchase of the next subsequent contract after that – or a similar pattern more spread out over the calendar, or a similar strategy using FRAs.

A condor is the simultaneous purchase ...

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