Holding a long and a short futures leg can reduce exposure to a common market move, yet the relationship between the legs remains risky. The account requirement is specific to the exchange, broker, product, ratio and date.
How offsets work
A clearing house can recognize risk offsets for selected related contracts. That does not imply one fixed discount for every pair or for every account. Margin methods, eligible combinations and broker house requirements can change. Obtain a current quote for the exact basket before entering it.
The practical cash requirement
Plan for initial and maintenance margin, variation margin as the basket moves against the position, and possible increases in house requirements. If the spread is entered one leg at a time, there may be a brief outright position and additional execution risk. A reduced initial deposit is not a maximum loss.
Risks specific to two markets
Quality and location basis, crop or processing shocks, correlations breaking down, mismatched expiry and thin deferred contracts can each change the spread. The worst historical annual result is a useful observation, not a bound. Include an exit plan that accounts for both legs.
A repeatable pretrade review
List exact symbols and months, leg quantities, USD sensitivity, recent bid-ask spreads, last trade dates, historical worst interim move and broker margin. Compare the P&L of the weighted basket with the chart label so a cents-per-bushel plot is not mistaken for dollars per account.
Test the exact dated structure
Inspect the leg months, historical years and selected window before drawing a conclusion from an average curve.
Open Futures Spread Analyzer →Frequently asked questions
Is the margin always lower than two outrights?
Not always. Eligibility and broker policy determine the actual requirement.
Is the margin the most I can lose?
No. Futures losses can exceed deposited margin.
Exchange references
Use the exchange material for product definitions and confirm current specifications, listed combinations and margins with your broker.
Continue the Intercommodity Spreads series
Also read Futures Spread Trading and Calendar Spread Trading.
Bring the formula to the chart
Compare a defined structure across historical years and review every leg before making a decision.
Explore the Analyzer →Educational material only, not investment advice. Examples are illustrative. Historical results do not guarantee future performance. Trading costs and slippage are excluded unless explicitly stated.