Britetrak.com

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BriteFutures - Home

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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 soybeans is currently up and you are in a soybean 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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