Not all spreads are created equally!

For example when it comes to equity index's spreads are 'enforced or dictated' by the difference between cost of carry and dividends. If they move outside of a certain range they are arbitragable.

Same with currencies, but instead of cost of carry and dividends its the difference in the individual interest rates.

With precious metals there is a known storage cost (with almost infinite supply), and known cost of carry, so while the spread isn't dictated by that, it is capped by that.

Natural Gas also has a known storage cost and a known cost of carry - but the amount of storage is limited - hence things can get a lot more volatile.

Several commodities are also heavily effected by weather. Cold US weather winter forecasts and low Natural Gas storage inventory will send prices and CERTAIN spreads (but not all) screaming. It will also have a large impact on OJ spreads. Weather also effects many of the grain spreads significantly. New crop prices behave differently to weather and longer dated fundamentals than old crop prices.

@Revan curious whether you made any progress on spread trading


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