853 Spread Trading

Spreads are another means to limit price risk in rapidly changing markets. A spread is the simultaneous purchase and sale of futures or options contracts in the same or related markets. Intramarket, intermarket, and interexchange arbitrages are commonly used. Purchasing a contract in one expiration of a futures contract while selling a contract in a different expiration would be an intramarket spread. This strategy would be useful where there are seasonal variations in demand for a commodity.

The objective of a spread trade is to profit from a change in the price differential between the contracts or between futures and options. In natural gas, the wide basis risk of the North American markets has created an active market in spreads trading for different locations, as various locations are priced as a differential to NYMEX. In electricity, it is anticipated that there will be an active market in seasonal spreads and in spreads between contracts covering different delivery points as well as intercommodity spread trading, particularly between natural gas and electricity, called the spark spread.

Solar Stirling Engine Basics Explained

Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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