446A COMpLete guide tO tHe Futures MArKet
 ■    The Limited-Risk Spread 
 the limited-risk spread is a type of intracommodity spread involving the buying of a near month 
(relatively speaking) and the selling of a more distant month in a storable commodity in which the 
process of taking delivery, storing, and redelivering at a later date does not require reinspection or 
involve major transportation or storage complications. this defi  nition would exclude such commodi-
ties as live cattle, which by defi  nition are nonstorable, and sugar, which involves major complications 
in taking delivery and storing. Commodities that fall into the limited-risk category include corn, 
wheat, oats, soybeans, soybean oil, copper, cotton, orange juice, cocoa, and lumber. 
2   
 in a commodity fulfi  lling the above specifi  cations, the maximum premium that a more distant 
month can command over a nearby contract is roughly equal to the cost of taking delivery, holding 
the commodity for the length of time between the two expirations, and then redelivering. the cost 
for this entire operation is referred to as  full carry.  the term  limited risk  will be used only when the 
nearby month is at a discount. For example, assuming full carry in the October/december cotton 
    FIGURE   30.1    July and december 2015 Coff  ee Futures vs. July/december 2015 Coff  ee spread
Chart created using tradestation. ©tradestation t echnologies, inc. All rights reserved. 
 2  Although precious metals can easily be received in delivery, stored, and redelivered, they are not listed here 
because spreads in precious metals are almost entirely determined by carrying charges. thus, the only motivation 
for implementing an intramarket precious metals spread is an expectation for a change in carrying charges. in 
contrast, the purpose of a limited-risk spread is to profi  t from an expected narrowing of the spread relative to 
the level implied by carrying charges (which are assumed to remain constant).