A spread represents the price difference between two related financial instruments, such as the bid-ask spread, calendar spreads between contract months, or yield spreads between bonds. Spreads often exhibit different risk-return characteristics than outright positions and may offer more predictable trading opportunities based on relationship stability.

Spread trading strategies profit from changes in price relationships rather than absolute price direction, often providing lower volatility and margin requirements. Different spread types include calendar spreads, inter-commodity spreads, and geographic spreads. Understanding spread dynamics helps identify relative value opportunities and manage portfolio risks.

Real-world example: The WTI-Brent crude oil spread trades at $3.50 per barrel with WTI at lower prices, creating arbitrage opportunities when transportation capacity allows moving oil between regions to capture the price differential.