Grain Intercommodity Spreads

Question 1

Spreading is a trade…

Answer 1

In which you simultaneously buy one futures contract and sell another

Question 2

Why are spread trades popular?

Answer 2

Spread strategies typically involve less risk than outright future positions, and so tend to have lower margin requirements

Question 3

What is a margin?

Answer 3

It is the collateral a holder of a financial instrument has to deposit with a broker or exchange to cover some of or all the credit risk the holder poses for the broker or exchange

Question 4

What are the three grain and oil seed spreads?

Answer 4

Intra market inter market and commodity product spreads.

Question 5

Participants who use these spread stragies…

Answer 5

Are more concerned with the relationship between he legs of the spread than the actual prices or direction of the market

Question 6

Intramarket spreads are also known as

Answer 6

Calender spreads

Question 7

Intramarket spreads involv e buying a futures contract…..

Answer 7

In one month while simultaneously selling one in a different month for the same commodity

Question 8

Calender spread traders are focused on

Answer 8

Changes in a relationship between two contract months and take advantage of them

Question 9

The calender spread will be successful if

Answer 9

The gain in the profitable leg with outweigh the loss in the losing leg