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Spread Traders Futures spread traders seek to capture profits while lowering the margin requirements substantially. A trader may execute an "intra-commodity spread" by buying "long" a contract of December wheat and selling "short" a contract of July wheat. An "inter-commodity spread" would buy long December wheat but sell short December corn. Spread trading reduces account margin requirements by a significant amount. Option traders seek to capture profits while lowering their debit (or margin) requirements depending on their market or "volatility" outlook. If an options trader is bullish/bearish a market, you can place a "bull call spread", "bear put spread", "ratio spread", "free option trade", or, simply go long/short a futures contract and buy an option in the opposite direction for "insurance." If an options trader has no view of market direction you may either buy/sell an options "straddle" or "strangle." Both the futures and options spread trading can dramatically enhance your profits and minimize any short term losses if traded smartly and with discipline. It is imperative to know the tendency for futures spreads and it is critical for options traders to know if the options implied volatility warrant a "buyer's market" or, "seller's market."
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