Which type of spread involves opposing long/short positions for different delivery times?

• A. Crush spread
• B. Crack spread
• C. Calendar spread
• D. Quality spread

Answer: (C)

The type of spread that involves opposing long/short positions for different delivery times is known as a calendar spread. This trading strategy exploits the price differences between futures contracts with different expiration dates. By taking a long position in one contract and a short position in another contract with a different delivery time, traders can capitalize on anticipated changes in price over time, benefiting from the shifts in the time value of the contracts.

For example, a trader might buy a futures contract that expires in a nearer month and sell a contract that expires in a later month. The goal is to benefit from the changes in prices as the expiration dates approach, reflecting the supply and demand for the underlying asset at those different times.

Other types of spreads mentioned, like the crush spread and crack spread, relate to the processing of commodities (soybean crush and crude oil refining, respectively) and focus on the relationships between the physical commodities and products, rather than the timing of futures contracts. The quality spread involves differences in quality among similar products but does not center around the timing aspect, which is the defining characteristic of a calendar spread.