Spreads
Spreads are another possible strategy for investing in the
futures market. In its most basic form a spread involves buying one futures contract and selling another futures contract. The point of this is to profit from an expected change in the purchase price of one and the selling price of the other. For example if April's wheat futures price is $2.50 a bushel and June's price is $2.75 per bushel (a 25 cent increase) you can project that in the next few months the price will widen between the two contracts by more than 25 cents. If your analysis is correct then you could sell the lower priced contract and buy the higher priced one. Then if the market moves in your favor and the April futures price rises to $2.75 and June's moves to $3.50 you have a difference of 75 cents. At this point you could liquidate both contracts and realize a net gain.
