Futures Spread

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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.

INVESTOPEDIA EXPLAINS '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.

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  3. What techniques can be used for hedging exposure to the electronics sector?

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  4. How does market risk differ from specific risk?

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  5. How can an investor make money from a decline in the electronics sector?

    Speculation methods, such as short selling, futures contracts and put options, offer investors a way to make money from a ... Read Full Answer >>
  6. How can I calculate the notional value of a futures contract?

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