Trading calendar spread options on energy futures

Search by job title, salary or location to find your perfect role. Pricing Pricing option models and hedging tools that are traditionally utilised for standard vanilla options should not be applied to spread options for a variety of reasons, most notably the possibility of negative strike prices. How an energy marketing company can structure a risk free physical price cap for a customer or a price floor for a supplier. Why merchant energy and electric power assets are valuable Call options on spreads. These models are commonly used across the CSO trader community.

By creating a transparent, efficient marketplace based on electronic trading, we transformed energy markets and made them accessible across the globe. With more than 1, energy contracts, our products span crude and refined oil, natural gas, power, coal and emissions.

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Delayed Quotes Block Trades. Waiting for the Next Bull Market Gold: We examine three critical warning signs and conclude that the next downturn could be different from the crisis. There were no trades for this contract during the time period chosen.

Please choose another time period or contract. Reference Rate BRR -. Reference Rates Last Updated: Trade Date CME Globex CME ClearPort Open Outcry Open Interest 14 Sep 13 Sep 12 Sep 11 Sep 10 Sep 07 Sep 06 Sep 05 Sep 04 Sep 31 Aug 30 Aug 29 Aug 28 Aug 27 Aug 24 Aug 23 Aug 22 Aug 21 Aug 20 Aug 17 Aug Last Updated 14 Sep There are no block trades on this trade date. Crude oil CSOs The crude oil futures and options markets are global and are the most liquid and actively traded commodities contracts in the world.

This is in contrast to the natural gas market, where seasonality dictates the shape of the forward futures curve.

In crude oil, a backwardated market generally reflects potential supply constraints or shortages — distant futures prices are cheaper than near term because demand for oil adds a premium to the nearest delivery contract. Conversely, a higher price on the more distant futures contracts generally reflects plentiful supply or inventory levels. This is often referred to as a contango market, as illustrated in figure 2, where the West Texas Intermediate WTI term structure on May 1, is in steep contango.

The shape of the forward curve has important implications for inventory management. For example, if the market is backwardated, the current value of inventory is greater than the deferred future price. Holding inventory in this situation could result in selling at a lower price. Conversely, in a contango market, holding inventory and selling at a deferred date is expected to yield extra revenue net of storage costs. This convenience yield can be viewed as the embedded optionality attached to holding a physical commodity.

It is defined as the difference between the positive gain of holding a commodity minus the cost of storage. Therefore, the convenience yield can be positive or negative depending on the time period and the level of oil inventory. Pricing Pricing option models and hedging tools that are traditionally utilised for standard vanilla options should not be applied to spread options for a variety of reasons, most notably the possibility of negative strike prices.

Spread option pricing varies, but can be classified into two main approaches: Numerical models include Monte Carlo simulation, fast Fourier transform and numerical integration. The primary analytical model is a closed-form solution, known as the Bachelier model. The Bachelier model relies on the assumption that the underlying spread follows a symmetrically normal price distribution.

Since the price follows a normal distribution, volatility also needs to be treated differently. These models are commonly used across the CSO trader community. Unpredictable changes from any of these factors can have an impact on forward-curve prices and the correlation between the calendar months.

CSOs are flexible products that are sensitive to the slope of the forward-term curve and will rise or fall in value as the shape of that term curve changes with time. A move from contango to flat to backwardation will change the values of term differences along the curve, and CSOs can be leveraged to realise those steepening or flattening changes.

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Since the first successful energy futures contract was introduced almost a quarter century ago, trading in energy futures and options has played an important role in hedging against fluctuations in the price of petroleum products, crude oil, natural gas, propane, electricity, and most recently, coal. As you look to add liquid and actively-traded contracts to your portfolio, NYMEX WTI Light Sweet Crude Oil futures lead the charge for benchmark, efficient risk . Options, cash & futures markets are separate and distinct and do not necessarily respond in the same way to similar market stimulus. A movement in the cash market would not necessarily move in tandem with the related futures and options contract being offered.