Business and Personal Finance Dictionary

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• SPREAD TRADE
  
  Definition: A trade that profits from a positive move in one risk factor and a negative move in another. Examples: Long September gold futures and short December gold futures is a calendar spread trade that highlights the difference between gold delivered at the two dates. Other spread trades include: stereo trade (q.v.) , tailed calendar spread (q.v.) , tandem spread (q.v.) , and turtle trade (q.v.). Pricing: A calendar spread trade can be the basis for cash-and-carry arbitrage, which establishes a relationship between two forward prices. Risk Management: A simple calendar spread trade cannot establish the relationship between two futures prices, despite the popular belief that it can. Comment:
  
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