What is a Commodity-Product Spread?
A commodity-product spread involves the purchase of a given commodity and a subsequent sale of products derived from commodities of the same type. Generally, these two transactions take place simultaneously. However, if there is a relatively small amount of time between the execution of the two transactions, the strategy is still considered to be a commodity-product spread. It is also possible for a commodity-product spread to be conduced in reverse sequence. That is, the purchase of commodities may take place after the sale of products made with the same type of commodity. In both cases, there is generally no more than a thirty-day window in between the two transactions that compose the spread. Under the broad classification of a commodity-product spread are a number of specialized spreads. One common transaction of this nature is known as the crack spread. Essentially, a crack spread is a commodity-product spread that has to do with commodities such as crude oil. An example of a crac
