Jack Elijah Smith

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What is spread trading in futures?

Spread trading involves simultaneously buying one futures contract and selling another related contract to profit from price differences. For example, a trader might buy crude oil futures for one month and sell another month’s contract. This reduces directional risk since profits depend on the relative movement rather than overall price. Spreads are often used in commodities, interest rates, and currencies. They require lower margin than outright futures but demand deep market knowledge. Spread trading is considered a lower-risk strategy for experienced traders.