Describe the difference in these two commodity spreads
I think Crush spreads are spreads on commodities that are crushed, such as grapes, wheat maybe? And Crack spreads are on Oil i know that, converting it to Heating OIl or Gas…
UHHH crack spread is spread between oil and gas. and crush spread is for soybean and soybean oil… something like that
That’s about the extent of my knowledge as well. Crack: Long 5 oil, sell 3 kerosene, 2 gasoline Crush: Long soybeans, short meal and oil Not sure how they really differ.
Soybeans are CRUSHED to get meal and Oil Oil is CRACKED to get Heating Oil, Gas, Diesel, etc. That’s where they get their names from.
So there is really no fundamental difference other then the means of breaking them down? I wasn’t sure if there was some other math related to the crush.
no diff. i just forgot how you derive the spread. i mean is it Heating Oil + Gas - Oil?
Yeah I think a 5,3,2 crack would be Long 5 Oil contracts, Short 3 Heating Oil contracts, and 2 Gas futures or something like that. Or i guess you could reverse it too.
In Schweser, they suggest the existance of a reverse crush / crack spread. Does anyone know how tihs would work in practice? e.g. buying soy oil /meal and selling soybeans - what would be the point as you cannot then convert the meal and oil back into soybeans?
So the drug Crack is not really following the commodity convention. It is more like crushing coke and baking soda.