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The Crush Spread

The spread is defined as buying one futures contract, and selling a different, but related futures contract. Specifically, when trading the crush spread, you would buy soybeans and sell its respective products, the soybean meal and soybean oil. This is what is referred to as being crushed. If you buy the soybean meal or the soybean oil and sells soybeans, that is what is referred to as being reversed crushed. Soybeans alone have relatively little value. The value of soybeans is the fact that when crushed, the products have great value globally. Soybean meal is of value to the farms that raise chicken and hogs. Soybean meal is rich with protein and is fed to these animals to fatten them up. Soybean oil is of value across an array of industries. Primarily, soybean oil is used in food as one of many available edible oils. Soybean oil is also being used in a mixture to create an alternate source of energy to compete with crude oil. These uses and others of the products give soybeans their value.

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Saturday, 18 November 2017

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.