Spreads create a more level playing field. What is spread trading? Spread positions tend to be less risky than outright long buy or short sell commodity positions. Position trades can be held considerably longer at less risk by spreading, allowing you to participate in a big market move.
Since the front months tend to outperform the deferred months, a trader who is bullish on corn would buy the near month, sell the deferred month, and would like for the near month to move faster and farther than the deferred months.
This is the opposite of our Bull Futures Spread. Commodities also may have seasonal periods of supply, like the grain markets.
However, we are holding to the same price as we have always charged, in fairness to our customers. Trading the difference between two contracts in an intramarket spread results in much lower risk to the trader.
Doing so eliminates execution risk wherein one part of the pair executes but another part fails. When a futures contract expires, its seller is nominally obliged to physically deliver some quantity of the underlying commodity to the purchaser.
For example, a trader might buy December corn and sell December wheat.
Futures Spreads and Seasonality Many commodities markets have seasonal periods of supply and demand.