Using CME Group Agricultural Products in Spread Trading Strategies

This whitepaper provides an introduction to spread trading strategies with the four wheat contracts available at CME Group for proprietary traders, asset and hedge fund managers who may not be familiar with the wheat market but see it more from a quantitative and systematic perspective.

Excerpt:

Spread based trading is trading the relative value or difference of one product price compared to the other. Spread trading is also known as relative value trading. It is not the long-short direction of the market that is traded, but the difference or variance in the prices of the two products that is important.

CME Group Wheat futures and options provide a strong suite of products available for the user. CME Group has been the global benchmark for more than 135 years and includes the traditional Chicago Soft Red Winter (SRW) and Kansas City Hard Red Winter (HRW), but now also offers dynamic contracts based on Australian Wheat FOB (Platts) and Black Sea Wheat FOB (Platts).