What is the crack of spread?
Cracks range are investment strategies that include a range of commodities. The crack span focuses on spreading that exists between the basic product and the end products that develop and sell using the basic product. Crack analysis can help the investor in the purchase of futures related to the main product, and at the same time with regard to the sale of futures options related to derivative products.
One of the best examples of how a crack works has to do with the oil commodity. This product serves as a basis for a wide range of desired goods such as gasoline, heating oil and even some artificial fibers. Due to the extent of the terminal products that can be produced with oil, ensuring futures options for oil is often considered to be a major investment strategy. At the same time, the sale of futures for products created with oil in the right timelessness, which makes a significant profit from the company, can also help selling the possibilities of futures for products created with oil.
The key element of determining the degree of cracks propagation is related not only to the extent of the end products that are created using the basic product, but also by the current market demand for these products. This may sometimes include the consideration of the current level of demand in a given country or even with the country's geographical area. Using an example of oil, the investor would decide to get futures on oil at the best possible price. At the same time, the investor would try to sell futures options including gasoline, kerosene or polypropylene when the market demand is on the rise, but before the demand begins to match. By understanding the current difference between the main product and the final products, it is possible to determine the expansion of cracks and participate in buying and selling the best advantage.
As well as any investment strategy, the use of crack range includes careful examination of the relevant commodities, the evaluation of the current TRharvest conditions and projection of future performance. With proper use, cracks can provide the investor with important information that can lead to considerable return.