What Is Spread?
In derivatives, "spread" refers to the price difference between two related instruments. The most common spreads in crypto derivatives are: the basis spread (futures minus spot price), the funding spread (average funding rate across exchanges), calendar spreads (price difference between two expiration dates), and the bid-ask spread on individual contracts.
How Spread Works
Spread trading involves simultaneously buying one instrument and selling another to profit from changes in the spread rather than directional price movement. Calendar spreads (long near-month, short far-month futures or vice versa) profit from changes in the term structure. Cross-exchange basis spreads profit from price convergence between the same asset on different platforms.
Why It Matters for Traders
Monitoring spreads reveals market structure information invisible to directional traders. A widening basis spread signals increasing bullish sentiment; a narrowing or inverting spread signals bearishness. Sudden spread dislocations create arbitrage opportunities for fast traders and signal potential market stress for all participants.
