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There is no need to buy anything or give your credit card. Enter your email address below to get an automatic entry into the competition. The premise for the spread trade is that the trader expects the corn market to be stronger than the wheat market. Spreads are also common within the same commodity.
For example, a trader can buy July corn and sell December corn at the same time during spring; this is an example of a bull spread.
The front-month typically moves more than the further out or deferred months. If someone expects corn prices to move higher during the year, this would be a trade that supported this market view.
Corn prices can be volatile, while spreads usually only move a fraction of what transpires in the outright price. Spreads are a more conservative strategy than outright long or short positions in futures contracts.
The margin requirement for spreads tends to be much lower than it is in a straight long or short futures contract position. A trader can find almost any kind of commodity spread to meet an outlook in the market. Types of futures spreads include:. Traders are highly sensitive to the price spread between two contracts, which is the difference between the two contracts.
If July corn moves up faster than December corn, the spread will increase. In this case, buyers of the spread will make a profit.
This is a simple trend following system that ensures that you are always on the right side of the market. Download this Profit Spring Trading. Feb 20, - Ultimate Profit Solution has an average winrate of % according to Toshko Raychev. As part of the lau.
Spreads can be a more conservative way of approaching markets, but that does not mean they are completely risk-free. Anyone who has traded spreads over a period of time knows that things can sometimes go awry.
Unforeseen weather conditions and crop reports are examples of issues that can affect the price of commodities and cause spreads to move dramatically. A worst-case scenario is when both sides of the spread move in a money-losing direction. For example, say that the futures contract you buy moves sharply lower and the contract you sell moves sharply higher.
Two correlated commodities like corn and wheat often diverge. It is not a good feeling when you are looking for a five-cent gain on a spread, and overnight you lose 15 cents because of crop news from China.
On any trade, spread, or outright, one must always be aware of the risks even when employing a more conservative strategy. There are many different types of spreads you can trade when it comes to the commodity markets. Some other examples of spreads include:.