Commodity-Product Spread

DEFINITION of 'Commodity-Product Spread'

The commodity-product spread is the difference between the price of a raw material commodity and price of a finished product created from that commodity. A common commodity-product spread is the "crack spread". This is the spread between the price of crude oil and the price of refined oil products.

BREAKING DOWN 'Commodity-Product Spread'

Betting on changes in the commodity-product spread is a popular trade in the futures market. The trade can be very useful for firms which convert raw materials to products. These firms could buy commodity futures and sell product futures, hedging risk and helping to lock in profit margins.

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