Gold trading basics · Lesson 67 of 100

Gold Calendar Spreads: Calculate Relative-Maturity P&L and Leg Risk

Define both legs and the quote convention of a futures calendar spread, then reconcile its P&L without assuming equal contracts eliminate risk.

Define Both Spread Legs: instructional diagram for lesson 67 — CYGURU GOLD · Original lesson schematic. Examples are illustrative.

A spread is two defined exposures

A futures calendar spread combines positions in the same underlying product across different contract months. Its economic focus is the relationship between maturities, although both legs still have their own prices, specifications and settlement paths. Never rely only on the phrase buy the spread: exchanges and products can use different leg conventions. Write the exact long contract, short contract, quantities, multipliers and spread formula. This lesson defines the spread as nearby minus deferred and studies long nearby, short deferred. That explicit definition prevents a positive or negative quote from being mistaken for a universal direction instruction.

Reconcile the legs in an invented example

Suppose nearby gold futures are 2,000 and deferred futures 2,012. The defined nearby-minus-deferred spread is −12. Establish one long nearby and one short deferred, each with a hypothetical 100-ounce multiplier. Later the nearby is 2,030 and deferred 2,038, so the spread is −8. The long leg gains 30 × 100 = USD 3,000 and the short loses 26 × 100 = USD 2,600. Combined gross gain is USD 400, equal to the four-unit rise in the defined spread multiplied by 100. Both outright prices rose, but the relative move determined the combined price result under these matching assumptions.

Test a parallel move and a curve change separately

If both maturities had risen by exactly 30 from their starting levels, the matching long and short price changes would offset before costs. If the deferred rose more than the nearby, the defined spread would fall and this particular position would lose. These examples isolate curve behavior; they do not prove that the two maturities always respond one-for-one. Delivery terms, financing, inventory conditions and demand for particular maturities can change the relationship. A small observed spread volatility also does not rule out a large dislocation. Report both the spread history and the absolute cash requirements of its individual legs.

Calendar-spread ledger · long near, short far
Leg / measure	Initial	Later	Gross P&L
Long nearby, 100 oz	2,000	2,030	+$3,000
Short deferred, 100 oz	2,012	2,038	−$2,600
Near minus far	−12	−8	+$400
After stated $30 costs			+$370

The leg convention is explicit. This is a relative-maturity position, distinct from a single long exposure rolled forward.

Inspect execution as a package rather than a drawing

A supported exchange spread order can express a relationship between legs under documented rules. Executing legs independently creates temporary outright exposure when one fills before the other. The quoted calendar spread’s tick size and fill convention may differ from an assumed subtraction of two screen midpoints. Check whether the requested ratio, quantity and order type are supported, and reconcile actual leg fills. A paper chart showing a four-unit spread change cannot establish the price at which the combined instruction could be completed. Include commissions, bid-ask costs and any costs incurred when a leg must be replaced or unwound.

Do not confuse margin offsets with an economic guarantee

A clearing or broker arrangement may recognize some offset between correlated legs, but the current margin treatment is provider-specific and can change. Reduced required collateral is not a maximum-loss bound. Variation cash flows can arrive at different times or be managed in different accounts. Contract expiry and delivery restrictions can force a roll or closure. If multipliers differ, equal ticket counts do not even ensure equal ounce exposure. Keep gross leg notionals, net sensitivity assumptions and accessible collateral visible. The spread’s intended relative-value purpose does not remove operational, funding or model risk.

Practice task: submit a two-leg ledger

Reproduce the −12 to −8 spread movement and USD 400 gross gain, then subtract a stated USD 30 total cost to obtain USD 370 net. Write the opposite position and confirm that its gross result reverses sign under identical prices. Add a scenario where only the long leg executes initially and explain which outright exposure exists until the second fill. Your worksheet should include the quote definition, maturity identifiers, multipliers, quantity ratio and planned expiry handling. Finish by distinguishing this relative-maturity trade from rolling one long contract forward, even though both operations involve two contract months.

Gold Calendar Spreads: Calculate Relative-Maturity P&L and Leg Risk

A spread is two defined exposures

Reconcile the legs in an invented example

Test a parallel move and a curve change separately

Inspect execution as a package rather than a drawing

Do not confuse margin offsets with an economic guarantee

Practice task: submit a two-leg ledger

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