For a single future contract, I can calc the expected daily move (or rent) by using the following formula:
Rent = [Future Price * Implied Volatility / SQRT (252)]
I am looking for doing the same thing for the daily expected move of a spread between two futures contract (a spread can be negative which makes the exercise harder)
Input I have are:
Future 1 Price = 66.50 ; Future 2 = 67.00 Implied Future 1 = 0.23 ; Implied Future 2 = 0.22 Correlation Future 1/Future 2 = 0.9850
Thank you for your help.
I am looking for calculating the expected move (rent) of the the spread b/w the two Fut (using the IV of the spread b/w the two Fut). Thank you for your help.