Spread Trading

A spread trade using futures is created by buying a futures contract and simultaneously selling another futures contract against it. These strategies are referred to as relative value strategies. 1

The futures spread trade acts as a hedging transaction altering the trader’s exposure from an outright price fluctuation, to the price differential between the individual legs of the spread trade. 1

The profitability of a futures spread trade will depend of the price direction or differences in price movement for the legs of the strategy.1