Course 17 of 20 · Natural Gas Desk Academy

Options, Weather Exposure & Flexible Hedging

Stage D, Customer supply and regional specialisation. Level 8 of 10.

Option-based risk transfer and weather exposure management: option structures, volatility inputs, and hedging volume risk that varies with temperature.

118 chapters · 11 modules · every chapter one 8 to 10 minute explainer · builds on: Course 04, Course 12, Course 13

Enrol or enquire See the 118 chapters
How a chapter is sized

One chapter is one idea taken to the point of use

Each chapter is a single self-contained explainer of 8 to 10 narrated minutes, covering one idea to the point where you can use it.

Chapters run in order. Each one assumes only what the chapters before it taught, and capability belonging to a later course is named and deferred rather than half-covered.

Curriculum

11 modules · 118 chapters

Open any module for its full chapter list, in teaching order.

M0 Optionality on a Gas Desk Ch 1-10
  1. What Optionality Really Means on a Gas Desk
  2. A Buyer Who May Call Gas and a Seller Who Must Deliver
  3. Calls and Puts on Gas, Stated Plainly
  4. How a Gas Option Settles
  5. Exercise Styles and Why They Matter in Gas
  6. The Premium: What You Pay, When and To Whom
  7. Where an Option Sits Against a Swap
  8. Reading an Option Chain for a Gas Month
  9. Who Sells Gas Options, and Why They Do
  10. The Two Exposures This Course Exists to Handle
M1 Intrinsic Value, Time Value and Moneyness Ch 11-20
  1. Moneyness: In, At and Out of the Money
  2. Intrinsic Value as the Floor Under a Gas Premium
  3. Time Value and Why It Drains Away
  4. The Payoff at Expiry Versus the Value Before It
  5. Put-Call Parity as a Desk Sanity Check
  6. Options on Futures Versus Options on an Index
  7. Where the Cost of Carry Enters an Option Price
  8. Early Exercise: When Giving Up Time Value Pays
  9. Quoting Conventions and Turning Premium Into Money
  10. Four Ways Traders Misread a Premium
M2 The Sensitivities, Read as a Gas Desk Reads Them Ch 21-30
  1. Delta as a Hedge Ratio, Not a Probability
  2. Running a Delta Hedge on a Sold Option
  3. Gamma and the Price of Rehedging
  4. Vega: Your Exposure to the Volatility Input
  5. Theta: Paying Rent on Time
  6. The Sensitivities That Rarely Decide a Gas Trade
  7. How a Position's Sensitivities Change Near Expiry
  8. Reading the Risk Report on an Option Book
  9. Netting Sensitivities Across Months and Strikes
  10. What the Sensitivities Do Not Tell You
M3 Volatility in Gas Ch 31-41
  1. What a Volatility Number Actually Describes
  2. Measuring Realised Volatility From Price History
  3. Implied Volatility: Reading What the Market Has Priced
  4. Why Gas Volatility Behaves Unlike Other Markets
  5. Storage Levels and the Volatility Response
  6. The Seasonal Shape of Implied Volatility
  7. Term Structure: Volatility Along the Curve
  8. Skew and Smile: Why Strikes Price Differently
  9. Where Volatility Marks Come From and Who Checks Them
  10. Spikes, Jumps and the Limits of a Smooth Assumption
  11. Walking a Volatility Surface, Month by Month
M4 Pricing an Option a Desk Can Defend Ch 42-50
  1. What an Option Model Is For
  2. Futures-Option Valuation Inputs and Settlement Conventions
  3. Where the Formula's Assumptions Break on Gas
  4. Simulation Pricing in Plain Language
  5. Lattices and Why the Path Matters in Gas
  6. Choosing a Fit-for-Purpose and Independently Validated Model
  7. Validating an Option Mark Independently
  8. The Checks a Trader Runs Before Trusting a Price
  9. Pricing a Winter Call: A Worked Illustration
M5 Structures for a Supply Book Ch 51-62
  1. Capping the Price of a Supply Obligation
  2. Putting a Floor Under a Long Position
  3. The Collar: Buying Protection by Selling Upside
  4. Zero-Cost Structures and What They Actually Cost
  5. Participating Structures and Partial Protection
  6. Knock-Out and Knock-In Features
  7. Three-Way Structures and Their Hidden Leg
  8. Spreads: Capping the Cost of Protection
  9. Straddles, Strangles and Trading Movement Itself
  10. Calendar Spread Options on Gas
  11. The Swaption: An Option to Enter a Hedge
  12. Choosing Between a Cap and a Swap
M6 Spread Options and Asset-Backed Optionality Ch 63-75
  1. What Makes an Option a Spread Option
  2. Correlation: The Input That Drives Spread Value
  3. The Location Spread Option
  4. Basis Options and What They Hedge
  5. The Time Spread Option Behind a Storage Right
  6. Valuing a Storage Right as an Option, Part One
  7. Valuing a Storage Right as an Option, Part Two
  8. Delta Hedging a Storage Position
  9. Valuing Swing as an Option
  10. What Swing Flexibility Is Worth in a Bid
  11. The Spark Spread Option Where Gas Meets Power
  12. Heat Rate, Efficiency and the Conversion Term
  13. Selling Gas Into a Generator's Optionality
M7 Weather Exposure: The Volume Risk No Price Hedge Covers Ch 76-87
  1. The Risk a Perfect Price Hedge Leaves Behind
  2. Matching Weather Exposure to the Actual Settlement Index
  3. Where Forecasting Ends and Hedging Begins
  4. Sizing Volumetric Exposure Per Degree Day
  5. Price and Volume Moving Together
  6. Why the Correlation Is Not Symmetric
  7. The Hedge Error a Fixed Volume Creates
  8. A Warm Winter on a Heating Book
  9. A Cold Snap on the Same Book
  10. Cooling Load and the Summer Gas Exposure
  11. Hedging to Normal Is Itself a Position
  12. Mapping the Book's Weather Sensitivity
M8 Instruments That Transfer Weather and Volume Risk Ch 88-98
  1. What a Weather Derivative Is
  2. The Degree Day Index and Its Tick Value
  3. Weather Options: Paying for Protection Against Mildness
  4. Weather Swaps and Collars on Degree Days
  5. Station Basis: The Gap Between the Index and Your Load
  6. Pricing a Weather Trade Without a Traded Curve
  7. Where Weather Risk Transfer Runs Out
  8. Buying Flexibility Instead of Buying Protection
  9. Storage as a Volume Hedge, Not a Price Hedge
  10. Interruptible Sales as a Short Volume Option
  11. Demand Response as Purchased Flexibility
M9 Building and Running a Flexible Hedge Ch 99-109
  1. From Exposure Map to Hedge Objective
  2. Matching Instrument to Exposure
  3. The Linear Core and the Optional Edge
  4. Sizing the Option Layer
  5. Choosing the Strike
  6. Choosing Tenor and Expiry Against the Load Calendar
  7. Setting a Premium Budget for the Programme
  8. Rebalancing as the Season Arrives
  9. Monetising or Restructuring a Live Option Position
  10. Measuring Whether an Option Hedge Worked
  11. Reporting an Option Book to People Who Are Not Traders
M10 A Worked Flexible Hedge, and the Limits Ch 110-118
  1. The Book: A Weather-Exposed Supply Portfolio
  2. Measuring the Book's Combined Exposure
  3. Designing the Hedge for the Worked Book
  4. The Worked Book Through a Mild Season
  5. The Worked Book Through a Severe Winter
  6. Attributing the Outcome Between Price and Volume
  7. What the Programme Cost and What It Bought
  8. When Optionality Is the Wrong Answer
  9. What These Methods Cannot Do

The brochure gives each of these 118 chapters a paragraph on what it covers and what you can do once you have worked through it.

This is course 17 of twenty

It stands alone, and it is also the entry point to the Natural Gas Desk Academy pathway.

Enrol or enquire See the whole pathway