Most beginners think of futures trading as a simple bet on direction: up or down. Spread traders think differently. They buy one contract and sell a related one at the same time, so what matters is the difference between the two prices. Spreads are a core part of how commercial hedgers and professional traders use futures, and understanding them teaches a lot about how futures markets fit together.
What a spread is
A spread position has two "legs": one long and one short. If both prices rise or fall by the same amount, the spread doesn't change and the position neither gains nor loses much. The position profits or loses when the gap between the two prices widens or narrows.
CME Group's course on futures spreads describes them as offering potentially lower risk and cost efficiencies. The word potentially is doing real work there, as you'll see below.
The main types of spreads
| Type | What it pairs | Example |
|---|---|---|
| Calendar (intramarket) | Two delivery months of the same contract | Long July corn / short December corn |
| Intercommodity | Two different but related commodities | Corn vs. wheat; gold vs. silver |
| Processing | A raw commodity vs. the products made from it | The soybean "crush" (soybeans vs. meal and oil); the crude oil "crack" (crude vs. gasoline and heating oil) |
| Intermarket | Similar contracts on different exchanges or underlying indexes | Two related stock index futures |
Calendar spreads up close
Different delivery months of the same commodity rarely trade at the same price. The differences reflect things like storage costs, interest rates, expected supply and demand, and seasonal patterns. In grain markets, for example, the spread between old-crop and new-crop months can shift as harvest estimates change. USDA's monthly WASDE report is one widely watched source of those estimates.
Calendar spreads also show up in everyday futures trading: when a trader rolls a position from an expiring month to the next, they're effectively trading a calendar spread.
Why spread margins are often lower
Because the two legs of many spreads tend to move together, exchanges often recognize certain spreads and set lower margin requirements than for two separate outright positions. Brokers apply these as spread margin credits. That lower margin can make spreads look attractive to smaller accounts.
Be careful with that logic. Lower margin means the exchange expects less day-to-day movement. It doesn't cap your loss, and it means you can control more contracts with less money, which is still leverage. Margin rules vary by spread and broker and can change. Use our margin and leverage calculator to see the notional value you're actually controlling.
What a spread move is worth
To know what's at risk, convert the spread's movement into dollars. In a calendar spread between two months of the same contract, each leg has the same tick value, so a one-tick change in the spread is worth one tick value. For example, CME Group's crude oil futures have a tick of $0.01 per barrel worth $10 per contract, so if a calendar spread between two crude oil months widens by 10 cents, that's 10 ticks, or $100 per spread, in one direction or the other.
Intercommodity spreads are trickier because the legs often have different contract sizes and tick values. Traders sometimes use different numbers of contracts on each side to balance them. Our tick value calculator helps check each leg's value before you consider the spread as a whole.
How spread trades fail
- The legs decouple. Related markets usually move together until they don't. A supply shock, policy change, or weather event can send one leg sharply in the wrong direction.
- Squeezes near expiration. Calendar spreads involving a nearby month can move violently as that contract approaches delivery.
- Thin liquidity. Some spreads, especially in deferred months or less-traded products, have wide bid-ask gaps and can be hard to exit.
- Legging risk. Entering or exiting one leg at a time leaves you briefly with an outright position. Many platforms let you trade a spread as a single order to reduce this.
- "Seasonal" assumptions. A spread that moved one way in past years may not repeat. Seasonal tendencies aren't guarantees.
- Over-sizing. Low margin tempts traders into too many spreads, turning a "conservative" trade into a large one.
How to study spreads
- Learn the fundamentals of one market first. Start with a single market you understand, such as grains or energy.
- Chart the spread itself. Many platforms can plot one contract minus another. Watch how it behaves around reports like WASDE or the EIA's Weekly Petroleum Status Report.
- Know each leg's specs, including tick values and expiration dates, so you can calculate what a move in the spread is worth.
- Paper trade first, and write the exit rules for the spread into your trading plan before you start.
Before you trade
Futures are leveraged. A small price move can produce a large gain or loss, and losses can exceed the money in your account. This article is general education, not a recommendation to buy or sell any contract.
- Practice in a simulated (paper) account before using real money.
- Decide your maximum loss per trade before you enter, and size positions to it.
- Confirm current contract specifications and margin requirements with the exchange and your broker.
Common questions
What is a calendar spread in futures?
Buying one delivery month of a contract and selling a different month of the same contract, such as buying July corn and selling December corn. The trade depends on how the price difference between the two months changes.
Why is margin lower on spreads?
Because the two legs often move together, exchanges and brokers frequently treat a recognized spread as less risky than an outright position and set a lower margin. Requirements vary and can change, so check with your broker.
Are spreads safe for beginners?
They're not safe, just different. Spreads can move sharply, legs can move in opposite directions, and some spreads are thinly traded. Study them in simulation before risking money.
Sources
- Understanding Futures Spreads — CME Group Education. cmegroup.com/education/courses/understanding-futures-spreads.html
- Understanding Futures Expiration & Contract Roll — CME Group Education. www.cmegroup.com/education/courses/introduction-to-futures/understanding-futures-expiration-contract-roll.html
- World Agricultural Supply and Demand Estimates (WASDE) — U.S. Department of Agriculture. www.usda.gov/about-usda/general-information/staff-offices/office-chief-economist/commodity-markets/wasde-report
- Weekly Petroleum Status Report — U.S. Energy Information Administration. www.eia.gov/petroleum/supply/weekly
Last reviewed October 17, 2026. Educational content only; not investment advice. Contract specifications and margins change, so confirm current figures with the exchange and your broker. See our risk disclosure.
