Transcription of A GUIDE TO ENERGY HEDGING - Commodity, …
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A GUIDE TO ENERGY HEDGING . 1. Other Considerations ..38. Basis ..38. Example 12 Effect of Basis on a Fuel Dealer's Hedge ..41. Exchange of Futures for Physicals ..42. Mechanics of an EFP ..43. Example 13 Use of an EFP to Initiate a Position ..44. Example 14 Use of an EFP to Liquidate a Position ..44. Blind vs. Selective Hedge ..46. Technical Analysis ..46. Charting Price Trend Lines ..47. Volume and Open Interest ..48. Options ..50. Determinants of an Options Premium ..51. Strike Price vs. Futures Price ..51. Time Value ..52. Call/Put Parity ..52. Volatility ..53. Interest Rates ..54. Example 15 Setting a Cap on Gasoline Prices by Buying Calls ..54. Example 16 Setting a Floor Against a Gasoline Price Decline by Buying Puts ..55. Example 17 Purchasing an Out-of-the-Money Call to Cap Natural Gas Prices in a Potential High-Volatility Market ..56. Example 18 HEDGING Against a Natural Gas Price Decline in a Potential High-Volatility Market with Out-of-the-Money Puts ..57. Collars ..58. Example 19 An Industrial Gas Consumer Uses a Collar to Hedge Gas Prices at an Affordable Cost.
3 3 S ignificant, sometimes abrupt, changes in supply, demand, and pricing have touched many of the world’s commodity markets during the past 25 years, especially those for
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