|
Unleaded Gas Futures and Options Education
Unleaded gas futures and options quick facts:
Unleaded Gas Futures Trading Facts
Gasoline is the largest single volume refined product sold
in the United States and accounts for almost half of
national oil consumption. (RBOB) Reformulated gasoline
blendstock for oxygen blending
is the gasoline used since the
banning of MTBE as an additive to gasoline.
RBOB Unleaded gas future contracts
are one of the largest distillates of
crude oil contracts traded at the NYMEX. Unleaded gas future
contracts may be the most important energy future of all of
the petroleum distillates.
During the Sept. 11 attacks the NYMEX was destroyed but
because of the strength and resilience of the futures
markets and the exchanges, the
unleaded gas future contracts
were trading within days of the attacks. This is a testament
to the futures markets reliability and integrity.
The
NYMEX Division New York harbor
unleaded gasoline future
contracts trade in units of 42,000 gallons (1,000 barrels).
It is based on delivery at petroleum products terminals in
the harbor, the major East Coast trading center for imports
and domestic shipments from refineries in the New York
harbor area or from the Gulf Coast refining centers.
Along with the unleaded gas futures
contracts, options contracts, calendar spread options
contracts, crack spread options contracts, provide a
slate of flexible, liquid financial instruments.
Unleaded Gasoline Options
NYMEX Division Unleaded Gasoline options
provide a flexible means for hedgers (commercials) to
achieve price protection while retaining the ability to
participate in favorable unleaded gas futures price moves.
The opportunity cost is limited to the premium paid for the
option, plus the commissions and fees.
Unleaded Gas Options Defined
There are two types of options: calls and puts. A call gives
the buyer the right, but not the obligation, to buy unleaded
gas futures at a specific price (the strike or exercise
price) for a specific period of time. A put gives the buyer
the right, but not the obligation, to sell unleaded gas
futures at a specific for a specific period of time.
Buying a call or a put is similar to
purchasing an insurance policy: In return for a one-time up
front premium, the buyer obtains protection against the
occurrence of a risk. To protect against the risk of a
unleaded gas futures price increase, a hedger would purchase
a call, to protect against an unleaded gas futures price
decrease, he would buy a put.
If the price move does not occur, that
is, if cash market (spot) prices do not move in an adverse
direction, the options buyer forfeits only his premium and
is otherwise able to participate fully in any favorable
price move.
An options seller (or writer) performs a
function similar to that of an insurance company. The seller
collects the premium and is obligated to perform, should the
buyer exercise the option. If the option expires without
being exercised, the options seller profits by the amount of
the premium.
Unleaded Gas futures contracts have been
used to manage cash market price risk for more than a
century in the United States. Hedging allows a market
participant to lock in prices and margins in advance and
reduces the potential for unanticipated loss.
|
Unleaded Gas Futures Trading Unit
|
|
|
|
42,000 U.S. gallons (1,000
barrels).
|
|
|
|
Price Quotation
|
|
|
|
U.S. dollars and cents per
gallon.
|
|
|
|
Trading Hours
(All times are
New York time)
|
|
|
|
Open outcry unleaded
gas futures trading is conducted from 10:05 AM until
2:30 PM.
After-hours unleaded gas futures
trading is conducted via the NYMEX ACCESS®
internet-based trading platform beginning at 3:15 PM
on Mondays through Thursdays and concluding at 9:30
AM the following day. On Sundays, the session begins
at 7:00 PM.
|
|
|
|
Trading Months
|
|
|
|
12 consecutive months.
|
|
|
|
Minimum Price Fluctuation
|
|
|
|
$0.0001 (0.01¢) per gallon ($4.20
per contract).
|
|
|
|
Maximum Daily Price Fluctuation
|
|
|
|
$0.25 per gallon ($10,500 per
contract) for all months. If any contract is traded,
bid, or offered at the limit for five minutes,
trading is halted for five minutes. When trading
resumes, the limit is expanded by $0.25 per gallon
in either direction. If another halt were triggered,
the market would continue to be expanded by $0.25
per gallon in either direction after each successive
five-minute trading halt. There will be no maximum
price fluctuation limits during any one trading
session.
|
|
|
|
Last Trading Day
|
|
|
|
Unleaded gas futures trading
terminates at the close of business on the last
business day of the month preceding the delivery
month.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
