Common Types of Spreads: Rapid Fire
Chapters in this video
- 0:00 Carrying charge spread and its four synonym names
- 0:47 Cost of carry, full carry ceiling, and no floor
- 2:37 Bull spread: long nearby, short deferred, gap narrows
- 3:45 Bear spread: short nearby, long deferred, gap widens
- 4:46 Intermarket spread and the soybean crush example
- 5:42 Exam traps: leg assignments never flip
- 6:53 Rapid-fire recap
What this video covers
- Why a carrying charge spread is also called an intra-market, intra-commodity, inter-delivery, or calendar spread, and that all four names mean one commodity with two delivery months
- How cost of carry (storage, insurance, interest) drives the deferred month above the nearby in a normal market, and why the gap has a ceiling at full carry but no floor when nearby supply tightens into an inverted market
- Which leg is long in a bull spread versus a bear spread: bull is always long the nearby and short the deferred, bear is always short the nearby and long the deferred
- Why a bull spread profits when the gap narrows or inverts with no theoretical cap, while a bear spread profits when the gap widens with upside capped near full carry
- How financial futures like stock-index contracts can reverse the physical-commodity behavior because they have zero storage cost
- What an intermarket spread is: two different but related commodities, usually the same month, driven by economic relationship rather than cost of carry
- Why the soybean crush (long soybeans, short soybean meal and soybean oil) is the classic intermarket example, and why cost-of-carry reasoning is the wrong answer for any two-commodity spread
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 3 course also includes adaptive practice questions and spaced-repetition flashcards, free through the end of 2026.