intercommodity spread

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Intercommodity spread

In the commodities market, a spread consisting of a long position and a short position in different but related commodities for example, speculating that the price relationship between the two commodities will change, e.g., platinum and gold.

Intercommodity Spread

A spread in which an investor creates an artificial position on a commodity in a certain state. One has an intercommodity spread when one buys a futures contract for a given delivery month and sells a futures contract for a different delivery month on the same commodity but in a different state. For example, an investor can take a long position in crude oil futures for one month and a short position in refined oil futures for another month. This allows the investor to create an artificial position on the price of refining oil. This particular intercommodity spread is called a crack. See also: Crush spread.

intercommodity spread

An investment position in which an investor purchases one commodity and sells short a related but different commodity. An example of an intercommodity spread would be the purchase of a futures contract in silver and the sale of a contract in gold.
References in periodicals archive ?
The minimum trading increments for futures intermonth and intercommodity spreads as well as options will be unchanged.
Treasury and Interest Rate Swap predefined, implied intercommodity spreads.
Predefined, implied intercommodity spreads will make it easier and more efficient to execute these strategies and eliminates the risk of not being able to execute the spread at a desired price.
Ray Lottie, chairman of the MGEX board of directors and manager of cereal and eastern grain operations for General Mills added, "The ability to execute intercommodity spreads between the three major wheat classes via one electronic trading platform is an exciting and unique trading prospect.