Intermarket spreads are usually done to trade minor price discrepancies in the same market but on different exchanges. This type of spread is in the realm of the professional arbitrageur because the price differences are usually quite small. Low commissions and margins are often required for this type of trading. There is usually not as much risk involved in these kinds of spreads and the markets are often closely watched by professional traders.

An example of December 91 New York coffee and November 91 London coffee shown each contract repesents a different type of coffee so there is some relationship between the two, but they clearly diverge at different points. This type of spread is actually quite risky because each future represents a different type of coffee and different contract month, so the prices may not move in tandem.

Many traders find spreads appealing due to their perceived limited risk, versus the supposed unlimited or greater risk of outright long or short positions. The trader must always evaluate the entire equation of risk and reward to make a proper decision. Some spreads may offer limited risk but the reward may also be much lower. Commissions and execution costs are usually greater with spreads so this partly increases the risk in them.

Spreads analyzed in a proper perspective are an excellent way to trade the market, but in a different way than outright or option positions. But, just like the outrights and options, people can lose just as much trading spreads as any other type of trading. The trader must be realistic in evaluating the risk and reward potential of any spread trade.