Dual Edge Research publishes two powerful newsletters that work great individually — and even better together. The Bull Strangle Newsletter focuses on stocks and options, combining stock ownership with premium-selling strategies to generate consistent income and market-beating returns. The Smart Spreads Newsletter specializes in seasonal commodity futures spreads, offering a diversified approach with low correlation to equities. Together, they deliver a complete investment perspective — one focused on income, the other on diversification — all under one simple subscription.
Introduction
Commodity futures have always attracted traders looking for leverage, diversification, and exposure to global supply-and-demand trends. But anyone who has traded outright futures—even briefly—understands the real challenge: these contracts move fast. A single headline, weather model update, or inventory report can produce sharp, unexpected volatility. For many traders, the difficulty isn’t identifying opportunities; it’s managing the swings that come with highly leveraged directional positions.
That reality has pushed a growing number of traders to explore an alternative: commodity spread trading. Instead of taking a single long or short position in one contract month, spread traders simultaneously buy one futures contract and sell another. This shifts the focus away from absolute price movement and toward the relative movement between two related months. While both approaches have a legitimate place in the futures markets, they behave very differently—and for traders who prioritize risk control, the distinction is meaningful.
Outright Futures: High Reward, High Volatility
Outright futures positions provide clean directional exposure. If you believe crude oil will rise, you can go long the front-month contract. If you expect corn to fall, you can go short. The logic is straightforward, and the payoff is direct. But the risks are just as direct. Outright futures are among the most volatile instruments in the financial markets. Prices can gap overnight, react violently to geopolitical events, or swing on weather forecasts that change by the hour. Leverage amplifies both gains and losses, making it possible for a small move to produce an outsized impact on account equity. For this reason, outright futures tend to reward traders who have:
- A strong directional bias
- High tolerance for volatility
- The ability to manage intraday risk and adjust quickly
This style of trading is effective—but it’s not always conducive to risk-controlled strategies, especially for traders who want smoother equity curves and less emotional pressure.
Commodity Spreads: A More Stable Alternative
A commodity spread position—whether in grains, livestock, energies, or metals—takes advantage of the relationship between two delivery months of the same commodity. Instead of betting on the outright price of natural gas, for example, a trader might buy the July contract and sell the August contract, expecting seasonal or structural forces to influence the spread between them. Because each side of the trade partially offsets the other, spreads often exhibit lower net volatility than outright positions. Prices still move, but they tend to move within a narrower band, especially when the spread is driven by predictable seasonal patterns such as harvest cycles, refinery maintenance periods, or weather-related demand shifts. This relative-value behavior makes spreads attractive to traders who prioritize risk management.
Why Spreads Tend to Offer a More Controlled Risk Profile
Several characteristics contribute to the stability of spread trading:
1. Lower Volatility - Outright futures reflect every headline, every macro shock, and every supply disruption. Spreads, on the other hand, focus on the internal structure of a single market—how one month behaves relative to another. This insulates the position from much of the broader noise that drives directional volatility.
2. Reduced Margin Requirements - Because the two legs partially offset each other, exchanges typically assign significantly lower margin to spreads than to outright positions. This not only reduces capital stress but also lowers the probability of forced liquidation during fast-moving markets.
3. Clear Seasonal Drivers - Many commodity spreads exhibit reliable seasonal tendencies based on planting cycles, storage costs, feed demand, refinery output, or inventory build-and-draw patterns. These seasonal forces don’t move in a straight line, but they do provide a more statistically grounded foundation than short-term directional predictions.
4. More Stable Supply-and-Demand Relationships - Spreads reflect fundamental dynamics such as storage constraints, carry costs, and the shifting value of inventory from month to month. These relationships evolve slowly compared to the daily news flow that can whipsaw outright prices.
Taken together, these traits give spreads a personality that many traders describe as “smoother,” “more predictable,” or “less stressful” than trading outright futures.
Where Outright Futures Still Have the Edge
While spreads often appeal to risk-controlled traders, outright futures remain unmatched when:
- A trader has a high-conviction directional view
- A strong catalyst is expected (e.g., a supply shock)
- Liquidity is highest in the front-month contracts, which makes outright futures easier to enter and exit quickly.
- The goal is maximum exposure to price movement
For traders comfortable with volatility and willing to take on the emotional load of rapid market swings, outrights offer clearer potential for outsized returns. But that upside comes with the cost of higher stress, higher margin swings, and greater vulnerability to unpredictable news-driven movement.
Which Is Better for Risk-Controlled Trading?
While both approaches have merit, traders who prioritize risk management, smoothness of returns, and reduced emotional strain often find spread trading to be the more appropriate tool. The combination of lower volatility, seasonal structure, and reduced margin makes spreads particularly attractive to:
- Systematic traders
- Portfolio diversifiers
- Smaller accounts seeking capital efficiency
- Investors who prefer rule-based decision processes
Outrights still dominate the headlines, but spreads often dominate the realm of consistent, risk-controlled trading.
Exploring a Rules-Based Approach
For traders interested in a structured, rules-driven way to trade seasonally strong calendar spreads, the Smart Spreads Newsletter provides research, analytics, and a transparent process for identifying high-probability historical patterns. It demonstrates how disciplined spread selection and risk controls can turn seasonal data into a practical, repeatable trading approach.
More Information
Now you can get two powerful newsletters — for one simple price!
- For stocks and options, the Bull Strangle Newsletter shows you how to combine stock ownership with dual option selling — a disciplined strategy that has consistently outperformed the S&P 500.
- For commodity futures, the Smart Spreads Newsletter focuses on seasonal commodity spreads — a proven, low-correlation approach that thrives in all types of markets.
Each newsletter is designed to deliver consistent income on its own — but when used together, they create a complete, diversified trading approach that works in any market environment.
Visit BullStrangle.com to subscribe for just $1 for the first month.
For a video overview of the Bull Strangle Newsletter
For a video overview of the Smart Spreads Newsletter
Darren Carlat
Dual Edge Research
(214) 636-3133
DualEdgeResearch@gamil.com
Disclaimer
This information is for informational purposes only and should not be considered as investment advice. Past performance is not indicative of future results, and all investments carry inherent risk. Consult with a financial advisor before making any investment decisions.
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