Intercommodity spread

Intercommodity spread,

Definition of Intercommodity spread:

  1. 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.

  2. 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.

  3. 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?

  1. There are few types of intercommodity spreads, including one called a crush spread.
  2. 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.
  3. Intercommodity spread trading requires an understanding of various optioned commodities and the dynamics between them.
  4. This type of trading is not recommended for inexperienced traders.

Meaning of Intercommodity spread & Intercommodity spread Definition