Within a few months of listing, the premium of LPG futures is much higher than that of spot. This brings difficulties to individual investors' trading and enterprise hedging, and also brings good arbitrage opportunities.
Let's take a look at the relationship between LGP spot, futures and options. LPG spot derives LGP futures, which in turn derives LGP options. The target of LPG futures is spot, while the target of LPG options is futures. Spot is cash on delivery, even if the spot has been delivered; Futures are the spot for due delivery; Options are futures due for delivery.
The spot of liquefied petroleum gas is bought and sold by relevant enterprises at the current price; Liquefied petroleum gas futures are long and short on the basis of the futures price at that time; The choice of liquefied petroleum gas is to buy up, buy down, sell up and buy down. At the same time, options have different exercise prices to choose from. In addition to the ups and downs of one-legged trading, the buying and selling portfolios constitute different strategic combinations, and the trading methods are more complicated.
Basis = spot price-futures price
Basis is sometimes positive and sometimes negative, no matter positive or negative, as long as the absolute value is mostly high basis; The basis will also become larger and smaller with the change of the market; The change of basis will affect the effect of hedging and bring arbitrage opportunities.
In the face of high basis difference, how to trade mainly depends on our identity. Retail investors and LPG-related enterprises must have different starting points and trading methods.