What is the gross processing?
The gross processing range concerns the difference between the cost of commodity in its brutal form and the income that it created as soon as it is polished in its finished form. For example, such a margin would be the difference in oil costs and a positive return of gas sales. In investment circles, investors use gross processing as an opportunity to use the price differences between the commodity and the products it creates. This usually includes an investor who buys a long commodity and sells short in its refined form. Often there may be a mismatch between the price of commodity on the market and how much income is generated from the products based on this commodity. The span between them is known as a rough processing margin or GPM, and it is an important concept of the Commandine industry and investors to understand.
Most industries have their own specific formulas to determine the gross margin of their commodity. NapThe electricity industry is the so -called Spark Spark, which is the difference between the market price of electricity and what it costs to produce electricity. The industry pays great attention to this spread in an effort to determine what the best time to produce electricity is. In a similar way, the oil industry has a span of cracks and the soy industry has a crush range.
Investors can try to use the gross span of processing by using options contracts. A typical spread position in these cases would be to buy a low or take a long position on the basic commodity in the hope that the price will rise. The investor would then borrow opportunities with the intention of selling Helloh, also known as a short position, on the finished product created by the commodity in the hope that the price will fall.
This allows the investor to basically determine his own position, how much it costs to create a typical product. For example, an investor playing a crack widespread in the oil industry relies on the efforts of oil refinery to do their job well. On the other hand, the investor can go on such possibilities to go pRoti grain. In the case of soy shop, this would mean long for soy oil and feed and briefly on the soy itself, creating what is called the spread of reverse crush.