Most of the butterfly spread charts posted seem to be mean reverting, is that how they are traded compared to single pair spreads which can be very directional?
From my research, the butterfly spreads tend to be mean reverting but they can blow out. It is good to be diversified across spreads and size up conservatively. It is just conjecture on my part but I think that finding butterflies that are not too volatile or lack volatility is the best approach. That way one doesn't have to carry too much size or too little.
These links are working definitions of contango and backwardation. I'm sure a better treatment of the subject can be found in Aiken, Hull or Burghardt.
This is from Tastytrade. Tastytrade may not have the best reputation on ET but they do have useful content sporadically. An introduction to futures spreading terms and dynamics using crude oil as an example:
http://www.mrci.com/special/correl.htm This is a spread correlation matrix from MRCI. My aim in the next six months is to have a diversified portfolio of spreads. By trading several different uncorrelated markets, portfolio risk is (hopefully) mitigated. Don Bright always spoke about how his traders ran portfolios with "hundreds of spreads". Of course, markets can become extremely correlated and plummet in unison. In the most recent crash oil and the stock market collapsed together. It is probably worthwhile to do some historical testing on correlations during market turbulence. One asset seems to be always worth holding during periods of turmoil: volatility. Does anybody have any thoughts on this subject?
http://www.bis.org/publ/work420.htm Since the explosion of commodity ETF products, it seems that correlation between equities and commodities is rising.