Futures Option Strategies for 
Futures Spreads 
A spread with futures is not the same as a spread with options, except that one item 
is bought while another is simultaneously sold. In this manner, one side of the spread 
hedges the risk of the other. This chapter describes futures spreading and offers ways 
to use options as an adjunct to those spreads. 
The concept of calendar spreading with futures options is covered in this chap­
ter as well. This is the one strategy that is very different when using futures options, 
as opposed to using stock or index options. 
FUTURES SPREADS 
Before getting into option strategies, it is necessary to define futures spreads and to 
examine some common futures spreading strategies. 
FUTURES PRICING DIFFERENTIALS 
It has already been shown that, for any paiticular physical commodity, there are, at 
any one time, several futures that expire in different months. Oil futures have month­
ly expirations; sugar futures expire in only five months of any one calendar year. The 
frequency of expiration months depends on which futures contract one is discussing. 
Futures on the same underlying commodity will trade at different prices. The 
differential is due to several factors, not just time, as is the case with stock options. A 
major factor is carrying costs - how much one would spend to buy and hold the phys-
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