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What do you need to buy a call ? |
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YOU DEFINE: |
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The product you want to hedge
The reference such as Platt's ®
The quotation (ex: Cargoes Cif NWE) which matches your
physical purchases. |
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YOU CHOOSE: |
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The volume
The forward period
The settlement frequency
The ceiling price for the hedge. |
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These criteria define the call transaction |
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At the end of each settlement period throughout
the life of the option, the average of the quotation as, published
during this period is calculated to determine the realized floating
price during each settlement period. |
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The floating price is then compared to
the ceiling price of the call. |
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When the floating price is above
the ceiling price you receive
the difference in accordance with the volume of that period.
When the floating price is below
the ceiling price there is no payment.
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To reflect this protection
against rising price, you would pay a "premium" at the beginning
of the contract. |
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The premium varies, according to forward
period, settlement frequency, call ceiling price, and market
conditions. |
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Platt's ® is a registered company of McGraw-Hill/Standard
& Poors |
