In
finance, a
spread trade (also known as
relative value trade) is the simultaneous purchase of one
security and sale of a related security, called
legs, as a unit. Spread trades are usually executed with
options or
futures contracts as the legs, but other securities are sometimes used. They are executed to yield an overall net position whose value, called the
spread, depends on the difference between the prices of the legs. Common spreads are priced and traded as a unit on
futures exchanges rather than as individual legs, thus ensuring simultaneous execution and eliminating the
execution risk of one leg executing but the other failing.