Spread trading is not a jobbing between bid and offer, nor it involves speculation, its a different trading technique as there is one like option trading.
2007-05-05 05:01:20 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
Basically, spread treading for crude oil is a lower risk speculation about relationships between contracts. It's lower risk because you are long one position and short another position. Those two positions should be correlated (when one makes money the other will lose but hopefully a little less), but not always. It's still a speculation and you can still lose money.
A time spread is a bet about the relationship of one calendar contract relative to another. For example you might want to buy a contract for peak demand (say June) and sell one during a shoulder season (say October).
Another type of spread is the crack spread where you are making a bet on the relative value of crude oil vs. its constituent products, gasoline and heating oil.
Another type of spread is a BTU spread where you might make a a bet on the relative energy value of crude oil vs. natural gas (or other energy product).
2007-05-07 18:38:28 · answer #1 · answered by gls_merch 5 · 0⤊ 0⤋
A Spread is the simultaneous purchase and sale of the same or similar commodity in the same or different contract months. Spread trading is usually considered to be a lower risk strategy than an outright long or short futures position, and therefore margin requirements are usually much less than an outright long or short futures.
For example, if the price trend of cotton is currently up and you are in a cotton spread, (short one month and long another) the gain on the long position would likely offset the loss of the short position, and vice-versa. One side of the spread typically hedges the other, therefore the lower margin requirements. Keep in mind that spreads are not guaranteed to be less risky, there is risk of loss in all trading.
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2007-05-05 06:39:49 · answer #2 · answered by V.T.Venkataram 7 · 0⤊ 0⤋
Both venki (in response to this question) and I (in response to your previous question) have said what spread trading is.
Spread trading on crude oil is simply trading spreads using crude oil futures as the underlying security. That means the spread will consist of your choice of crude oil futures and options on crude oil futures. You may be long or short in any of your positions.
2007-05-05 07:09:05 · answer #3 · answered by zman492 7 · 0⤊ 0⤋
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2014-12-18 14:09:53 · answer #4 · answered by Anonymous · 0⤊ 0⤋
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2007-05-05 05:27:54 · answer #5 · answered by Jo Blo 6 · 0⤊ 0⤋