Definition of 'Opening Cross'
There are two types of opening crosses:
* **Long opening cross:** This is when a trader buys a futures contract at a lower price and sells it at a higher price. This can be done to lock in a profit if the trader believes that the price of the futures contract will increase.
* **Short opening cross:** This is when a trader sells a futures contract at a higher price and buys it back at a lower price. This can be done to hedge against a potential loss if the trader believes that the price of the futures contract will decrease.
Opening crosses are often used by traders who are speculating on the future price of a commodity or financial instrument. They can also be used by hedgers who want to protect themselves against a potential loss.
Opening crosses can be risky, as they involve taking a position in two different futures contracts at the same time. This can increase the trader's risk of loss if the price of the futures contract moves against them.
However, opening crosses can also be profitable, as they can allow traders to lock in a profit or hedge against a potential loss.
It is important to note that opening crosses are not the same as closing crosses. A closing cross is a transaction in which a trader buys and sells the same futures contract at the same price. This is done to close out a position that was previously opened.
Opening crosses and closing crosses are both important tools that can be used by traders to manage their risk and to profit from the movement of the futures markets.
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