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:
“You must be wise, in order to sniff out and weigh these mighty books, and swift in the hunt and brave in the battle; then, by careful reading and frequent reflection, crack open the bone and suck out the substantific marrow.”
—François Rabelais (1494–1553)
“[Allegory] should ... be very sparingly practised, lest, whilst the writer plays with his own fancies and diverts himself by cutting the air with his wide spread wings, he should soar out of view of his readers, leaving them in confusion and perplexity to explore his viewless track.”
—Sarah Fielding (1710–1768)