Singapore JetKero Options

Hudson Capital Energy is now making markets in Nymex cleared Sing JetKero Asian-style options. The ability to create and price structures such as Costless Collars in just seconds during Asian trading hours will help us provide Airlines and interested hedgers with enormous liquidity in this once opaque OTC-only market. This note is part of a Singapore Products Report our group will be distributing twice per week to possible counterparties who may be interested in trading Sing JetKero options.

Singapore JetKero swaps rebounded in late December after falling from highs of greater than $180 per barrel during the summer. The February contract bounced off the $55 level and later built support at $60, after hitting this level twice (the second week of December and again late last week). Looking further back along the contango futures curve, August09 bottomed out just below $65 and looks to be building support around the $70 level. It is this consolidation (not only in JetKero, but also in similar regional products markets) that has resulted in a decrease in implied volatilities, thus making option structures more attractive.

Fiscal stimulus in China will eventually impact consumer demand, increasing travel and therefore JetKero demand. The same is true in both the United States and Europe. Airlines looking to protect their fuel requirements for the remainder of 2009 can look to the Sing JetKero Feb09-Dec09 $57/90 Costless Collar. With the calendar swap trading above $69.00, this hedge provides a downside average buffer of approximately $12.00 with unlimited upside protection above $90.

Singapore, 10:00