A futures spread is when someone is long in a future contract and short in another future contract with different specifications.
Calendar or intra-commodity spread
We have a calendar or intra-commodity spread when we have open a long and a short position in futures contracts on the same underline asset but with different delivery dates, i.e. being long one WTI crude oil future with delivery date after 3 months and short one WTI crude oil contract with delivery date after six months. The purpose here is to exploit shifts in the term structure.
We have a inter-commodity spread when we have opened a long and a short position in futures contracts with different underline assets. The two assets must have a degree of correlation between their prices or be of the same nature. If the delivery dates are also different then we have a inter-commodity calendar spread, i.e. being long one WTI crude oil contract with delivery date after two months and short one gasoline contract with delivery date after four months. Inter-commodity spreads regarding oil and its derivatives are called crack spreads.
We have a inter-exchange spread when we have opened a long and a short position in futures contracts on the same underline asset which are being traded in different exchanges. The purpose here is to exploit arbitrage opportunities (riskless profit) if there is a price discrepancy on the same contract in the two different exchanges.
By using spreads an investor/trader reduces greatly the inherent risk of futures trading but also the profit potential. An outright futures position (long or short contracts) is by its nature more volatile than a spread. The margin requirement is also lower in spread strategies due to the lower risk that an investor/trader has to take.
On the other hand spreads trading needs detailed knowledge of the relevant market as the investor/trader has to be quite familiar with all the factors that affect the term structure and can be summarized in the valuation formulas of futures.
In spread strategies someone can profit in more than one way depending on the price movement of the long leg relevantly to the short leg. The long leg price might be advancing and the short leg price might be reducing or even remaining stagnant or the short leg might me reducing and the long leg reducing also but less than the short leg or every other possible profitable combination can occur.
Many spread strategies are based on the fact that futures with closer delivery dates are more volatile than those with distant delivery dates even if the factor that affects their price is the same. Market participants are generally more interested in closer delivery dates hence these contracts have much more volume and open interest than contracts with distant delivery dates.