Futures Spread

DEFINITION of 'Futures Spread'

An arbitrage technique in which a trader buys one commodity and sells another contract of the same commodity to capitalize on a discrepancy in prices.

BREAKING DOWN 'Futures Spread'

In a futures spread, the goal is to profit from the change in the price difference between two futures contracts while hedging against risk. However, future spreads occur infrequently and when they can be identified, the opportunity for arbitrage is quickly removed though a shift of supply and demand conditions.