Quick Answer
An intermarket spread is long one commodity and short a different but related commodity, or the same commodity on two different exchanges, usually in the same delivery month. It trades the economic relationship between two products, driven by supply, demand, or processing margins, rather than by the cost of carry that sets a calendar spread.
This section covers the third named spread type and how it contrasts with the first. Where a carrying charge spread trades two months of one commodity, an intermarket spread trades two different products in the same month.
Two Different but Related Markets
An intermarket spread is long one commodity and short a different but related commodity (or the same commodity on two different exchanges), with the legs usually in the same delivery month.
- The two legs are different commodities that move together because they share supply, demand, or a production relationship: for example, related grains, or a raw input versus its processed output.
- The spreader is betting on how the relationship between the two products moves, not on the direction of either market outright. Keeping both legs in the same delivery month isolates that product-to-product relationship rather than a calendar effect.
- Because the two products are correlated, a broad move in the sector pushes both legs the same way and largely cancels, leaving the position exposed mainly to the change in the gap between the two products.
Think of it this way: this is still a bet on a gap, just a gap between two different things instead of two dates. You are asking whether soybeans will gain on corn, or whether a processed product will gain on its raw input, and you let the overall grain market do whatever it does.
Named Examples
The exam names the category "intermarket spreads" without listing specific pairs. The examples below are standard illustrations from exchange education, not an NFA-mandated list:
- Related grains: a soybean-corn spread or a wheat-corn spread, trading the price relationship producers weigh when deciding which crop to plant.
- Input versus processed output (a product spread): the soybean crush, which is long soybeans and short soybean meal and soybean oil, trading the processing margin between the raw bean and its products. The reverse crush takes the opposite legs (short soybeans, long meal and oil).
- Same commodity on two different exchanges: an intermarket spread can also be the same commodity traded on two exchanges, capturing the price difference between the two venues.
How It Differs From a Carrying Charge Spread
The two spread types are easy to confuse because both trade a gap, but the gap comes from completely different forces.
- A carrying charge spread is one commodity, two delivery months, and the gap is driven by cost of carry (storage, insurance, and interest).
- An intermarket spread is two different but related commodities, usually the same month, and the gap is driven by the economic relationship between the two products: planting choices, processing margins, and substitution, not by storage costs.
| Feature | Carrying charge spread | Intermarket spread |
|---|---|---|
| Legs | Same commodity, two delivery months | Two different but related commodities (or same commodity, two exchanges) |
| Delivery month | Different months | Usually the same month |
| What drives the gap | Cost of carry (storage + insurance + interest) | Product-to-product relationship (supply/demand, processing margin) |
| Example | Long May corn / short July corn | Long soybeans / short soybean meal and oil (crush); soybean-corn |
Exam Tip: Gotchas
- An intermarket spread is two DIFFERENT (but related) commodities, usually in the same delivery month, not two months of the same commodity. Two delivery months of one commodity is a carrying charge (calendar) spread. Reading "spread" and defaulting to same-commodity-different-months mislabels a soybean-corn or crush spread.
- The gap here is not about storage. A carrying charge spread's gap comes from the cost of carry between two dates; an intermarket spread's gap comes from the economic link between two products. Applying cost-of-carry reasoning to a soybean-corn or crush spread uses the wrong driver.