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Heating Oil Hedger

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Heating Oil Hedger
A hedger in the heating oil market is an individual who uses the futures market to offset price risk when intending to sell or buy the actual heating oil. Hedging is possible because the heating oil cash prices and heating oil futures prices tend to move in the same direction. However, the difference between the cash price and the futures price may narrow or widen. The change in the difference between the cash price and the futures price is called basis risk. Because of the changing basis no hedge can be perfect.

Heating oil can be hedged on the New York Mercantile Exchange (NYMEX). The NYMEX offers a competitive and transparent market place to engage in efficient hedging strategies. If you are interested in hedging heating oil please contact us. One of our experienced heating oil traders will be happy to give you a call to discuss hedging strategies with you.

What is a Crack Spread? A crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products). Refiners wishing to hedge their price exposures use crack spreads. One of the most important factors affecting the crack spread is the relative proportion of various petroleum products produced by a refinery.

A Guide To Energy Hedging

Click on the link above to download a very informative .pdf brochure entitled "A Guide to Energy Hedging.” It was published by the New York Mercantile exchange. This is a must read guide for any novice or advanced trader considering a hedge in the heating oil market using exchange traded heating oil futures and options.

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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