Options(Caps and Floors)

Caps

How it works
A price cap is created using a call option. A consumer hedger will want to “cap” the cost of his fuel at a certain price level and enjoy lower prices if possible. By using a call option, the hedger can decide at what price his cap will start and decide whether the cost of the call option makes sense for a given budget. Often, HCEnergy will help solve for the cap that fits a given budget.

 

 

 

 

 

 

 

 

 

Floors

How it works
A price floor is created using a put option. A producer hedger will want a “floor” for the price of his product at a certain price level and enjoy higher prices if possible. By using a put option, the hedger can decide at what price his floor will start and decide whether the cost of the put option makes sense for a given budget. Often, HCEnergy will help solve for the put that fits a given budget.

 

 

 

 

 

 

 

 

 

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