Factor is short (or long) the spread, what does this mean?
Q: From the Factor update on 3-Nov-2018 you wrote “30-Yr T-Bond/10-Yr Note spread – The major trend is down. The decline this past week completed a flag pattern on the daily and intraday chart. Factor is short the spread.”
I am having difficulty understanding, can you clarify which contract is long and which contract is short?
A: Short any spread is an expression that the first market listed in the pair is the market shorted and the last market mentioned in the spread is the market bought.
If I say I am short Bonds/Notes, it means I am short Bonds and long Notes.
If I say I am long Bonds/Notes, my long is in Bonds.
This is the vernacular of the forex markets.
EXAMPLE: The standard trade in USD and GBP is always listed as GBP/USD. So, I sell GBP and buy USD I am considered short GBPUSD. If I buy GBP and sell USD, I am long the spread.
EXAMPLE: “Long NZD/USD” implies long NZD and short USD and the phrase “short NZD/USD” implies short NZD and longUSD.
In spot forex trade the terms “long” and “short” always refers to the primary currency unit – the first currency listed in the pair.
