Floor
Purpose:
To provide the Producer with a guaranteed minimum price and enable participation in a potential market upward trend.
How it works:
A Floor involves the purchase by the Producer of a Put option at a specified strike price.
The producer must precise:
- the Floor Strike level,
- the guarantee duration (maturities)
- the volumes to which the guarantee will apply.
The premium is paid upfront by the Producer and the cash settlement will apply to the contracted volumes of the financial transaction.
Rewards / Risks:
Rewards
- Protection against price decrease
- Participation in market potential upward trend
Risks
- Loss of premium
Settlement:
- If the Market reference price is lower than the Floor strike price, the Producer exercises his option. Gaselys pays the difference between the Floor strike price and the Market reference price.
Realized price = Floor strike price – premium
- If the Market reference price is higher than the Floor strike price, the Producer does not exercise his option and sells at Market reference price.
Realized price = Market reference price – premium
- 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.