Education - Intercommodity

Multi Leg Part III - Crack Spread

In the petroleum industry, refineries are most concerned about hedging the difference between their input costs and output prices. Their profits are tied directly to the spread between the price of crude oil and the prices of refined products, gasoline and distillates (diesel and jet fuel). This spread is called Crack spread.


Multi Leg Part II - Crush Spreads

The most popular inter commodity spreads involve the simultaneous execution of multiple futures positions designed to replicate the inputs and outputs of several real world product transformations or to hedge that production process by putting on the opposite spread. Examples of these are Crush and Crack spreads.