Spread Charting

Discussion in 'Financial Futures' started by -ooO-(GoldTrade, May 4, 2003.

  1. From the little bit that I know, options have been a better way to spread commodities as long as there's not a lot of time premium. Take the HUG/HOG spread:

    If your long Unleaded, short heating oil, the worst thing that can happen in a spread is Unleaded goes down, heating oil goes up. With options your losses will be limited whereas futures could (theoretically but no likely) keep going in the wrong direction. Also should both commodities move in the same direction and continue to trend, futures would end up flat whereas options would show a profit (one leg eventually goes to 0).

    I'm very new to this but that's my understanding.
    #21     Feb 4, 2006