In this instance, you spread by taking an opposite position in a related contract. You might spread corn against wheat. You might spread heating oil against unleaded gasoline. Quite often, operators who trade large size and are market makers hedge the S&P 500 by taking an opposite position in the Nasdaq or the Dow. Soybean traders often hedge by spreading off against the meal, the oil, or bot...
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Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.
