Dec / May Cotton Spread Revisited


I wrote about this spread nearly two months ago and the holding period is about to come to an end circa April 22. The spread initially narrowed further (lost money) to about 90, and has since widened to 66.37 trading above the cost basis of 68.54 ever so slightly.

I received a few emails about this spread and how it’s quoted. Most were looking at it from a May point of view since May has been the higher price. Yet this spread is quoted from what you do with the December contract. When the spread becomes more negative it is narrowing. When it is negative, like it was in this case, and it increases in value (-90 to -66) the spread is getting closer to zero and is thus widening.

When you buy spreads, you want them to widen and vice versa for selling spreads.

Please note: I reserve the right to delete comments that are offensive or off-topic.