What are the general strategies for Speculating?
In general, the speculator takes a view on the market and plays accordingly. If one is bullish on the market, one can buy Futures, and vice versa for a bearish outlook. There is another strategy of playing the spreads, in which case the speculator trades the “basis”. When a basis risk is taken, the speculator primarily bets on either the cost of carry (interest rate in case of index futures) going up (in which case he would pay the basis) or going down (receive the basis). Pay the basis implies going short on a future with near month maturity while at the same time going long on a future with longer term maturity.
