What does Inter-commodity Spread mean?
A spread consisting of a long position and a short position in different but related commodities in a commodities futures market. A trader buys a futures contract for a commodity for a given delivery month and simultaneously sells a futures contract for a different delivery month for another but related commodity such as Gold and Silver.
Futures Knowledge Explains Inter-commodity Spread
Inter-commodity Spread strategy is based on the speculation that the price relationship between the two commodities will change. The purchase of a given delivery month of one futures market and the simultaneous sale of the same delivery month of a different, but related, futures market. Crush spread is an example of Inter-commodity Spread. Here an investor takes a long position in crude oil futures for one month and a short position in refined oil futures for another month.