| Crack Spread |
The spread created when purchasing oil futures and offsetting the position by selling gasoline and heating oil futures.
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As the two futures contracts within the spread are relatively similar, risk is hedged against. The name is derived from the fact that "cracking" oil produces gasoline and heating oil. Thus, oil refiners are able to generate residual income by entering into these transactions.
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Futures Fundamentals - For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work, why investors use them, and much more. |
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