Singapore JetKero Short Vol Strategy

A weak Dollar vs the Pound and Euro allowed crude markets to show strength in early NY trading before surprisingly bearish US inventory numbers pushed WTI lower. Gasoline stocks showed an equally surprising draw on the back of lower imports and increased refinery shut-ins. The front-month contango (March-April) increased as Opec production cuts appear to have placed a cushion under everything but front-month crude, which is currently at the mercy of weekly inventory numbers.

Implied volatility increased slightly yesterday across the energy complex. Yesterday’s Sing Fuel Oil 180 consumer hedge allowing for premium collection above $212.50 can be replicated in the Sing JetKero complex as well. Looking again at the Feb ’09 through Jan ’10 tenor, the trade pays out an average of $412,500 per 33,000 barrels of Sing JetKero (using a conversion of 6.6 barrels = 1mt) per month at or above the current calendar swap price of about $65. Below $65, the payout begins to decrease until it reaches zero at an average price of $51.25. Below this point, the trade incurs losses. To learn more about this hedge using Sing JetKero, contact us at the info below.

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