Swaps

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.

Execution:

• Select the most relevant contract (e.g. US Gulf Coast No.6 Fuel Oil 3%)
• Select volume of fuel to hedge
• Select time period

Monte Carlo simulated data using 30% volatility

Scenario 1

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.

Scenario 2

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.