Seasonal spread traders are spread traders that take advantage of seasonal patterns by holding long

Long (finance)

In finance, a long position in a security, such as a stock or a bond, or equivalently to be long in a security, means the holder of the position owns the security and will profit if the price of the security goes up. Going long is the more conventional practice of investing and is contrasted with...

 and short positions in futures contract

Futures contract

In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

s simultaneously in the same or a related commodity markets

Commodity markets

Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts....

. The spread is the difference between the simultaneous values of these futures contracts.

Traders may use a combination of fundamental analysis

Fundamental analysis

Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, interest rates, production, earnings, and...

, technical

Technical analysis

In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...

, and historical factors in their analysis. Speculators hope to profit from the relative changes in price between the initial and offsetting positions. Contracts may be spread against different months or different markets. Traders are concerned with whether the changes in the difference between the sides of the spread are moving in their favor or not. Position traders may hold trades longer and with less risk

Risk

Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...

 using spreads.

Lower good faith margin

Margin (finance)

In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty...

 deposits required by commodity exchanges to trade spreads means more opportunities to average up and diversify positions. Spreads may behave smoother than the underlying futures contracts.

External links

• Reminiscences of a Stock Operator
  Reminiscences of a Stock Operator
  Reminiscences of a Stock Operator is a 1923 novel by American author Edwin Lefèvre which is the thinly disguised biography of Jesse Lauriston Livermore...
  
  by Edwin Lefèvre
  Edwin Lefèvre
  Edwin Lefèvre was an American journalist, writer, and statesman most noted for his writings on Wall Street business.Lefèvre was born George Edwin Henry Lefèvre on 23 January 1871 in Colón, Colombia , the son of Henry Lefèvre , who was for many years the general agent of the Pacific Steamship...
  
  (best-selling biography of Jesse Livermore) multiple reissues, last in 2004 (ISBN 0-471-67876-7)
• Futures Spread Trading by Steven A. Mitchell
• Seasonal Futures Charts Seasonal Commodity Spread Charts & Quotes