What is the futures range?

Sulfur Futures is a combination of related futures positions commonly referred to as legs. The only unsared - or direct - futures position earns or loses money because the price of the commodity rises and decreases, but the range is designed to earn money based on the price relationship between a combination of positions. Futures span usually consists of legs that are positively correlated, which means that their prices tend to move together. They may also include legs that tend to move against each other. Futures spreads to earn money on price relationships while reducing the risk.

An example of a futures range based on a positive correlation would be to buy contracts in both heating oil and unleaded gasoline. Both are derived from oil and generally their prices move up and down together. However, the trader could determine that heating oil supplies are lower than normal and gasoline supplies are higher than usual. If he or she is noting the refiner to fix an imbalance byYou will dower more capacity towards the production of heating oil and gasoline, the trader could buy a gasoline contract and sell heating oil. As the stocks balance at their normal level, the price of each foot should be in favor of the merchant.

In general, such a range between commodity futures is a less risky proposal than just buying the gasoline itself or selling heating oil itself. In the above example, if the hurricane closes oil production, resulting in lack of heating oil and gasoline, both tend to rise rapidly. It can be expected that a lonely short leg in heating oil will lose a large but spread that included a long gasoline leg can form a lot, not if all, losses. The inventory differential would become a secondary factor and the trader would look at a break with a break than a Massive loss.

correlated futures usually extendsThey mean less risk than direct positions, so Futures replacements usually offer a lower range of ensuring to hold them. However, correlation does not always hold and can spread and sometimes goes as bad as a direct position. Other possible futures range can be constructed by purchasing and selling different contact months of the same commodity based on different seasonal tendencies. By adding different combinations of options to related futures contracts, the potential risk and reward can be tuned to almost any taste.