# Futures Spreads Explained > Futures spreads buy one contract and sell a related one. Learn calendar, inter market and inter commodity spreads, margin benefits, quoting and worked examples. Source: https://learn.tradelabsai.com/futures/futures-spreads-explained/ Track: Futures · Level: Advanced · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Futures Spreads Explained", https://learn.tradelabsai.com/futures/futures-spreads-explained/ A futures spread is a position that is long one futures contract and short a related one at the same time. Instead of betting on the outright price, the trader bets on the price difference between the two. Futures spreads are central to commodity and interest rate markets: exchanges list them as tradable products, give them lower margins and publish their prices. The broader idea of spread trading across all markets is in [Spread Trading](https://learn.tradelabsai.com/strategies/spread-trading/). ## Types of futures spreads | Type | Legs | Example | |---|---|---| | Calendar (intra commodity) | Same product, different months | Long July corn, short December corn | | Inter commodity | Related products | Long gold, short silver; long corn, short wheat | | Processing | Input vs outputs | Crude oil vs gasoline and heating oil (crack) | | Inter market (location) | Same product, different exchanges or locations | WTI vs Brent crude oil | | Yield curve | Different maturities of rate futures | Long 2 year, short 10 year Treasury futures | | Quality | Different grades | Chicago wheat vs Kansas City wheat | ## Why trade spreads - **Lower risk:** the two legs offset much of the market's overall movement. - **Lower margin:** exchanges recognise spread risk is smaller. A calendar spread in corn may require a fraction of the margin of an outright position. See [Futures Margin: Initial and Maintenance](https://learn.tradelabsai.com/futures/futures-margin/). - **Specific views:** spreads isolate one relationship, such as tight near term supply or a widening WTI Brent gap. - **Seasonality:** many spreads follow seasonal patterns linked to harvests, weather and demand. See [Seasonality in Commodities](https://learn.tradelabsai.com/commodities/seasonality-in-commodities/). ## Quoting and direction Spreads are usually quoted as the first leg minus the second. - **Buying the spread:** buy the first leg, sell the second. Profits if the spread widens (first leg rises relative to the second). - **Selling the spread:** sell the first leg, buy the second. Profits if the spread narrows. **Example: A WTI Brent spread** WTI crude trades at $78 and Brent at $82, so WTI minus Brent is minus $4. A trader expects US supply to tighten relative to global supply and buys the spread: long one WTI contract, short one Brent contract (both 1,000 barrels). Weeks later, WTI is $80 and Brent $82.50, a spread of minus $2.50. The spread rose $1.50, a profit of $1,500, even though both prices rose. If both had fallen by the same amount, the trade would have been roughly flat. See [Crude Oil](https://learn.tradelabsai.com/commodities/crude-oil/). ## Ratio spreads When the two legs differ in size or value, traders use ratios to balance them: - **Gold silver:** a gold contract (100 ounces) is worth far more than a silver contract (5,000 ounces at a much lower price), so traders may use several silver contracts per gold contract. - **Crack spreads:** 3:2:1 means three crude contracts against two gasoline and one heating oil. See [Crack Spreads](https://learn.tradelabsai.com/futures/crack-spreads/). - **Yield curve spreads:** weighted by DV01 so that each leg has the same sensitivity to rate changes. See [DV01](https://learn.tradelabsai.com/bonds-credit/dv01/). ## Exchange listed spreads Exchanges list many spreads as single instruments with their own order books. Trading a listed spread avoids leg risk (one leg filling while the other moves) and usually gets better prices than trading legs separately. ## Risks - **Spreads can move sharply,** especially near expiry or during supply shocks. - **Correlations can break,** for example when a pipeline outage separates two related prices. - **Liquidity differs** between legs; deferred months can be thin. - **Low margin invites over sizing.** - **Delivery and expiry dates** differ between legs. See [First Notice Day and Last Trading Day](https://learn.tradelabsai.com/futures/first-notice-day/). ## How traders analyse spreads - **Historical ranges and seasonality** of the spread. - **Fundamentals:** inventories, transport costs, processing margins. - **Carry and curve shape** for calendar spreads. See [Contango](https://learn.tradelabsai.com/futures/contango/). - **Charts of the spread itself,** not the outright prices. ## Frequently asked questions ### What is a futures spread? A position that is long one futures contract and short a related one, profiting from changes in the price difference between them. ### Why is margin lower for futures spreads? Because the two legs offset each other's risk, exchanges charge less margin than for two separate outright positions. ### What is an inter commodity spread? A spread between two different but related commodities, such as gold and silver or corn and wheat. Next, focus on spreads between months in [Calendar Spreads in Futures](https://learn.tradelabsai.com/futures/calendar-spreads-in-futures/). ## Continue learning - Next lesson: [Calendar Spreads in Futures](https://learn.tradelabsai.com/futures/calendar-spreads-in-futures/) - Previous lesson: [Cash-and-Carry Arbitrage](https://learn.tradelabsai.com/futures/cash-and-carry-arbitrage/) - Related: [Cash-and-Carry Arbitrage](https://learn.tradelabsai.com/futures/cash-and-carry-arbitrage/): Cash and carry arbitrage buys an asset and sells its futures when futures are rich versus carry costs. Learn the formula, gold, index and crypto examples, and risks. - Related: [Spread Trading](https://learn.tradelabsai.com/strategies/spread-trading/): Spread trading buys one contract and sells a related one to profit from changes in the difference between them. Learn the main types, margins and risks. - Related: [Calendar Spreads in Futures](https://learn.tradelabsai.com/futures/calendar-spreads-in-futures/): A futures calendar spread buys one contract month and sells another. Learn bull and bear spreads, what moves them, seasonality and a worked crude oil example. - Related: [Crack Spreads](https://learn.tradelabsai.com/futures/crack-spreads/): The crack spread measures the margin between crude oil and refined products like gasoline and diesel. Learn the 3:2:1 spread, how to calculate it and who trades it. - Related: [Crush Spreads](https://learn.tradelabsai.com/futures/crush-spreads/): The soybean crush spread measures the margin between soybeans and the meal and oil made from them. Learn the calculation, board crush, reverse crush and drivers. - Related: [Yield Curve Trades: Steepeners, Flatteners and Butterflies](https://learn.tradelabsai.com/bonds-credit/yield-curve-trades/): Yield curve trades bet on changes in the curve's shape rather than its level. Learn steepeners, flatteners and butterflies, DV01 weighting, carry and roll down.