Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products).
In the futures markets, the "crack spread" is a specific spread trade involving simultaneously buying and selling contracts in crude oil and one or more derivative products, typically gasoline and heating oil. Oil refineries may trade a crack spread to hedge the price risk of their operations, while speculators attempt to profit from a change in the oil/gasoline price differential.
Read more about Crack Spread: Factors Affecting The Crack Spread, Futures Trading
Famous quotes containing the words crack and/or spread:
“One more crack from you, bimbo, and you’ll be holding a lily.”
—James Gleason (1886–1959)
“To-night she will spread her brown hair on his pillow,
But I shall be hearing the harsh cries of wild fowl.”
—Patrick MacDonogh (1902–1961)