T & K Futures and Options Inc.


1-800-926-4468
1-772-873-9674


Home
Open Account
Margins
Contract Specs
Charts & Quotes
Education
Risk Disclosure
Links


 

 




 











































































































 


 

 RBOB Unleaded Gasoline Futures and Options Market Trading

 

The No Nonsense Guide to Buying and Selling Options

 

*The information contained within this webpage comes from sources believed to be reliable. No guarantees are being made to the content's accuracy or completeness.

 

Unleaded Gas Futures Trading Facts

Gasoline is a complex mixture of hundreds of lighter liquid hydrocarbons used in internal combustion engines. Gasoline makes up the largest "cut" from a barrel of crude oil. Approximately half of the barrel of crude oil is refined into gasoline. Gasoline is the largest single volume refined product sold in the United States and accounts for almost half of national oil consumption. Congress amended the Clean Air Act in 1990 to mandate the addition of ethanol to gasoline.(RBOB) Reformulated gasoline blendstock for oxygen blending is the gasoline used since the banning of MTBE as an additive to gasoline. RBOB Unleaded gas future contracts are one of the largest distillates of crude oil contracts traded at the NYMEX. Unleaded gas future contracts may be the most important energy future of all of the petroleum distillates.

 

Unleaded Gas Futures and Options Quick Facts

  • 42,000 gallon contract size

  • one cent move equals $420

  • trades all months

  • Unleaded gas futures symbol (RB)

 

Here is the energy products brochure courtesy of the CME Group.

Energy Brochure

 

The formula for unleaded gas is adjusted based on the temperature that is anticipated for a certain marketing area up to six times per year. The purpose of this adjustment is to help the gasoline vaporize more readily. Especially in winter facilitating cold starts and better driving performance.

During the Sept. 11 attacks the NYMEX was destroyed but because of the strength and resilience of the futures markets and the exchanges, the unleaded gas future contracts were trading within days of the attacks. This is a testament to the futures markets reliability and integrity.

 

Are you an unleaded gas hedger? If so, click here to learn more.

 

RBOB Unleaded Gas Options on Futures Contracts Explained

An unleaded gas call option gives the purchaser the right but not the obligation to purchase the underlying futures contract for a specific time period and a specific price (strike price). Let's say that you wanted to purchase a November unleaded gas $2.10 call option and pay a premium of $3,200.

This means that you bought the right but not the obligation to buy 42,000 gallons of November unleaded gas for $2.10 per gallon. Of course, very few options are bought for the purpose of taking delivery but that is one potential outcome. Chances are that you either bought the unleaded gas option to hedge your price risk in the physical unleaded gas market (maybe you are a producer like a refiner or maybe you are a consumber and own a transportation company) or you are speculating that unleaded gas prices will go higher in an attempt to make a profit.

A unleaded gas put option gives the purchaser the right but not the obligation to sell the underlying futures contract for a specific time period and a specific price. Let's say that you wanted to buy a November unleaded gas $1.99 put option and pay a premium of $3,100.

This means that you have the right but not the obligation to sell 42,000 gallons of November unleaded gas at $1.00 per gallon.

What is the delta factor?

The delta factor of an option represents the estimated percentage of change an option will receive based on the movements in the underlying futures contract.

Let's assume the November unleaded gas $2.10 call option above has a 30% delta factor. This means that if the underlying futures contract were to rally by $1,000, then the call option would accrue by approximately $300 or 30% of $1,000 in the RBOB unleaded gas futures contract.

What is theta?

Options are wasting assets which means that they lose value as time passes. The theta of an option is the measure of time decay.

Let's assume that you bought a November unleaded gas $2.10 call option with 60 days left until expiration. Let's also assume that the unleaded gas futures prices have moved very little over the last month and are exactly the same price 30 days later. Your option will have lost 30 days worth of time and therefore will be worth less today that it was when it had 60 days left until expiration.

What is vega?

Vega is a measure of the implied volatility of an option contract as it relates to its underlying futures contract. For instance, if the underlying futures contract is extremely volatile then the implied volatility of the options of that futures contract will be affected.

In a high implied volatility environment option premiums tend to expand. Conversely, in a low implied volatility environment the option premiums tend to decrease.

 

 

The No Nonsense Guide to Buying and Selling Options

 

To visit other energy futures visit crude oil futures, heating oil futures and natural gas futures.

 

 

 

**Click Here Now! for actual unleaded gas futures and options quotes, prices, expirations, charts .....

 

Also visit  education, basics

SITE MAP

EDUCATION | PRIVACY POLICY | HOME
Copyright 2004-2015 TKFutures Inc. All Rights Reserved.

The information presented in this commodity futures and options site is not investment advice and is for informational purposes only. No guarantees are being made to its accuracy or completeness. This information can be considered a solicitation to enter into a derivatives trade. Investing in futures and options carries substantial risk of loss and is not suitable for some people. Past or simulated performance is not indicative to future results.