Definition of Intercommodity spread:
An interccommodity spread is a sophisticated options trade that attempts to take advantage of the value differential between two or more related commodities, such as crude oil and heating oil, or corn and wheat. A commodity is a necessary good used in commerce that is interchangeable with other commodities of the same type.
Options strategy in which a futures contract of a given delivery month is purchased and, simultaneously, a futures contract of the same delivery month of a different (but usually associated) commodity is sold. Its objective is to benefit from the changing price relationships of the two commodities. Also called intermarket spread. See also intracommodity spread.
A trader of intercommodity spreads will go long on one futures market in a given delivery month while simultaneously going short on the related commodity in the same delivery month.
How to use Intercommodity spread in a sentence?
- There are few types of intercommodity spreads, including one called a crush spread.
- An interccommodity spread is an options trade that attempts to take advantage of the value differential between two or more related commodities in the marketplace.
- Intercommodity spread trading requires an understanding of various optioned commodities and the dynamics between them.
- This type of trading is not recommended for inexperienced traders.
Meaning of Intercommodity spread & Intercommodity spread Definition