Crack Spread

Dictionary Says

Definition of 'Crack Spread'


The spread created in commodity markets by purchasing oil futures and offsetting the position by selling gasoline and heating oil futures. This investment alignment allows the investor to hedge against risk due to the offsetting nature of the securities.

Investopedia Says

Investopedia explains 'Crack Spread'


The name of this strategy is derived from the fact that "cracking" oil produces gasoline and heating oil. Therefore, oil refiners are able to generate residual income by entering into these transactions. During the summer of 2005, the effects of hurricanes in the Southeastern United States created large volatility in the crack spread.

comments powered by Disqus
Hot Definitions
  1. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center