The previous lesson said a commodity merchant earns its living by transforming a physical commodity across time, location, and form, and hedging the flat price away. This lesson takes that one idea apart and makes it precise, because these three spreads are the merchant’s actual product. Every trade a house like Vitol or Trafigura puts on is, underneath, a bet that a commodity is worth more somewhere else, at some other time, or in some other form, by more than it costs to move it, store it, or process it. We build each of the three on a plain everyday example first, then map it onto the desk, and we work the numbers so you can see exactly where the profit sits and what would make it vanish. This is the spine of the module: the oil, metals, shipping, and finance lessons that follow are all about executing these three arbitrages well.
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