Commodity-Product Spread

Commodity-Product Spread is the difference between the cost of a raw commodity and the cost of what it’s actually turned into. Commodities are raw materials like oil, gold, silver, corn, natural gas...basically all of the investments one can make in actual...stuff.

When a brick of gold is turned into a big, blingy chain like the ones we see in rap videos, we have a commodity-product spread. This spread is probably on the smaller side though, since gold itself is super-valuable.

In the investment world, this spread creates the opportunity to play with options by going long on the raw commodity and short on the product it creates.