Learn Futures Spread Trading

Learn the most effective strategies for buying and selling options on futures contracts. Also learn producer and consumer hedging strategies.

What is futures spread trading? Futures spread trading involves going long a futures contract while simultaneously going short another. Futures spread trading can involve the same market with different months such as going long old crop corn (July) and shorting new crop corn (Dec). Futures spread trading can also involve two different futures such as going short (June) heating oil and going long (June) unleaded gas.

What are the benefits of futures spread trading? Futures spread trading often offers lower volatility than straight futures contracts and futures spread trading usually carries lower margin requirements. Futures spread trading can minimize risk during limit moves in the futures markets. Often spread traders do not care about market direction just a widening or tightening of the futures spread itself.

What are the risks of futures spread trading accounts? Market risk is ever-present when investing in futures spread trading and involves substantial risk and is not suitable for all investors. Futures spread trading involves unlimited risk of loss and stop orders cannot be used to limit losses. Past performance is not indicative of future results. Only risk capital should be used to invest in futures spread trading.

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