Article How to Figure Margin for Commodity Spreads

T2W Bot

Staff member
1,498 115
I received an email from a student in Singapore regarding the margin for Spread trading and where to find it.  Spread trading is gaining more popularity, even internationally based on the emails I have been receiving.  Let’s now look at two different Futures Exchanges and identify the process of figuring out how much Margin (capital) is required to trade these things called Spreads.
Spread trading involves the simultaneous purchase of one month and simultaneous sale of another month of the same Commodity to be an Intra-Commodity Spread.  To simultaneously purchase and sell related Commodities is known as an Inter-Commodity Spread.
The Intra-Commodity Spread is the least volatile and risky of the two.  Notice I said “least” not “risk free”.  All investments have some degree of risk associated to them.  Because of this less risk and volatility they require the least amount of Margin to trade.  Spread trading is almost like being a Commercial in the markets.  You are actually hedging...

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moka2

Established member
529 14
How to Hedge Calender spreads?

Hello Don
I have been searching to find a way to Hedge these Calenders Spreads ( Futures to Futures) and It seems although there are CME product Called "Calender SPread Options" CSO no body seeems to know them! ( Not to be confused with Calender spread between Option contract these are actualy OPtion like any other but the Underlying is a "Calender Spread of 2 Futures contracts.. same that you have mentioned in your articale
CME group has info on it and symbols but nothing else
For example
http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-cso.html
Or
http://www.cmegroup.com/trading/energy/files/trading-energy-calendar-spread-options.pdf

Tried Options Express/ Interactive Brokers but no Luck ( wieird part CME groups says IB supports them but IB says tthey don;t)
Are you aware of them ? do you use them? Specially for Oil Spreads and Agri seasonal spreads
 
 
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