A swap is a financial instrument that allows you to hedge your exposure by fixing the price you pay for fuel at a predefined level, over a predefined time period.
- Select the most relevant contract (e.g. US Gulf Coast No.6 Fuel Oil 3%)
- Select volume of fuel to hedge
- Select time period
Fuel price moves below swap execution price (red zone). You make a cash payment to your trading counterparty but this is offset by lower physical fuel prices in the market.
Fuel price moves above swap execution price (green zone). You receive cash from your trading counterparty to offset the higher physical fuel prices you must pay in the market.