futures spread (or spread) is a long-short futures position that provides exposure to a difference in two prices. If both futures are traded on the same exchange, two types of spreads are possible:

  • An intracommodity spread (or calendar spread) is long one future and short another. Both have the same underlier, but they have different maturities.
  • An intercommodity spread is a long-short position in futures on different underliers. Both typically have the same maturity.

Spreads can also be constructed with futures traded on different exchanges. Typically this is done using futures on the same underlier, either to earn arbitrage profits or, in the case of commodity or energy underliers, to create an exposure to price spreads between two geographically separate delivery points.

Spread trading is the trading of futures spreads. For speculators, spread trading offers reduced risk compared to trading outright futures. This is because the long and short futures that comprise a spread are usually correlated, so they tend to partially hedge one another. For this reason, exchanges generally have less strict margin requirements for futures spreads.