Floating to fix price for a consumer
Purpose:
To enable a Consumer with a floating price position to swap to a fixed price and get hedged against potential market rise.
How it works:
A Consumer with an initial floating price and a bullish mindset can swap to a fixed price for whole or part of the remaining maturities and volumes of his physical contract.
The Floating-to-Fix strategy involves the purchase of a financial swap.
The swap settlement applies only to the financial transaction contracted volumes
The Consumer must decide on load profile, maturities and indexation reference for the financial swap. All settlement prices are based on market published references.
Rewards / Risks:
Rewards
- No upfront premium
- Hedge against rising prices
- Smoothed treasury
Risks
- Premium to floating price if market decreases below the Swap Strike price
Settlement:
- If the Market reference price is higher than the fixed price (Swap Strike price ), the seller of the swap (Gaselys) will pay the buyer (Consumer) the difference between the Market reference price and the fixed price (Swap Strike price).
Realized price =Swap Strike price
- If the Market reference price is lower than the swap fixed price, the seller of the swap (Gaselys) will receive from the buyer (Consumer) the difference between the Market reference price and the fixed price (Swap Strike price).
Realized price = Swap Strike price.
- Numerical example on request
Download the product note With respect to Gaselys MIFID Policy, this product is classified as “Hedging and Optimisation” - Property of Gaselys – Unauthorised reproduction is prohibited
Disclaimer
This documentation is for information purposes only.
Figures are only given as a matter of example and are not intended to reflect the market prices.
Certain transactions may give rise to substantial risk and are not suitable for all investors and no representation is made that any returns indicated will be achieved.
In no circumstances should it be considered as an offer by Gaselys, its subsidiaries or affiliates, to provide any service or product or an offer or solicitation of an offer to enter into a
transaction, nor any advice or counsel.
Gaselys does not give any warranty as to the accuracy or completeness of the information contained herein, which is given on a confidential basis only.
However, as part of your risk management policy, it may be in your interest to enter into such derivative transactions, after having analysed (if necessary with the help of external
financial, legal or otherwise advisors) the specific risks which such transactions may imply and the advantages they may provide.