Crack Spread Handbook

  • 14 Aug 2013
  • By CME Group
  • Topics: Energy

Trading the Price Spread Between Crude Oil and Products Derived from It

Oil refinery profits are tied directly to the spread, or difference, between the price of crude oil and the prices of products that result from refining crude oil: gasoline, diesel fuel, jet fuel and heating oil.

The Crack Spread Handbook provides a thorough explanation of the different ways that the crack spread can be traded, for hedging or profit. Contents include:

  • The Two Basic Types of Crack Spreads
  • Trading Options on Crack Spreads
  • Factors Affecting Crack Spread Value
  • Issues to Consider When Implementing Trades
  • Crack Spread Trading Examples
    • Fixing Refiner Margins Through a Simple 1:1 Crack Spread
    • Refiner with a Diversified Slate Hedging with the 3:2:1 Crack Spread
    • Purchasing a Crack Spread (or Refiner's Reverse Crack Spread)
    • Replicating a Refiner's 3:2:1 Crack Spread with Crack Spread Options
    • Setting a Floor with Crack Spread Options

Read the Handbook