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FAQs #8

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What is a crack spread? 
 
A crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil andpetroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products). Refiners wishing to hedge their price exposures use crack spreads. One of the most important factors affecting the crack spread is the relative proportion of various petroleum products produced by a refinery.
 
If you have any questions regarding trading crude oil using futures and options, please contact one of our licensed brokers.  

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