704 
TABLE 35-3. 
Profit and loss of crack spread. 
Contract 
2 March Crude 
1 March Unleaded 
1 March Heating Oil 
Net Profit (before commissions) 
Initial 
Price 
18.00 
.6000 
.5500 
Part V: Index Options and Futures 
Subsequent 
Price 
18.50 
.6075 
.5575 
Gain in 
Dollars 
+ $1,000 
- $ 315 
- $ 315 
+ $ 370 
One can calculate that the crack spread at the new prices has shrunk to 5.965. 
Thus, the spreader was correct in predicting that the spread would narrow, and he 
profited. 
Margin requirements are also favorable for this type of spread, generally being 
slightly less than the speculative requirement for two contracts of crude oil. 
The above examples demonstrate some of the various intermarket spreads that 
are heavily watched and traded by futures spreaders. They often provide some of the 
most reliable profit situations without requiring one to predict the actual direction of 
the market itself. Only the differential of the spread is important. 
One should not assume that all intermarket spreads receive favorable margin 
treatment. Only those that have traditional relationships do. 
USING FUTURES OPTIONS IN FUTURES SPREADS 
After viewing the above examples, one can see that futures spreads are not the same 
as what we typically know as option spreads. However, option contracts may be use­
ful in futures spreading strategies. They can often provide an additional measure of 
profit potential for very little additional risk. This is true for both intramarket and 
intermarket spreads. 
The futures option calendar spread is discussed first. The calendar spread with 
futures options is not the same as the calendar spread with stock or index options. In 
fact, it may best be viewed as an alternative to the intramarket futures spread rather 
than as an option spread strategy. 
CALENDAR SPREADS 
A calendar spread with futures options would still be constructed in the familiar 
manner - buy the May call, sell the March call with the same striking price. However,