This is an agreement to buy or sell a certain amount of a commodity, at set periodic intervals, for a guaranteed price, during the length of the agreement. For example a seller agrees with a buyer to sell 1 ton of steel every week, for 10 weeks, at $5000 per transaction (regardless of the real market price at the time). The "swing" refers to the purchase or sale occurring at each periodic interval. Penalties are imposed if either the buyer or seller fails to make the agreed purchase / sale at the agreed price and schedule. This method is most commonly used in energy trading.
Related information about swing option:
- Swing Option Definition | Investopedia
A swing option contract states the least and most energy an option holder can buy (or "take") per day and per month, how much that energy will cost (its strike ...
- Option style - Wikipedia, the free encyclopedia
A swing option gives the purchaser the right to exercise one and only one call or put on any one of a number of specified exercise dates (this latter aspect is ...
- Understanding the Valuation of Swing Contracts - Financial ...
and selling the gas on the spot market if it is not needed), or whether the swing option is worth more if left unexercised. Working backward in the tree to the ...
- Swing Options Structure & Pricing - Risk Limited Corporation
A swing option grants the option holder the right to take … a volume of some specified product; with a volume “swing” between some minimum and maximum ...
- Valuation of Commodity-Based Swing Options∗ - MIT
case of a swing option, as well as to propose and calibrate a stochastic process appropriate for .... Mathematical Description of the Standard Swing Option ...
- Pricing of Electricity Swing Options* - University of Michigan
swing option prices and also gives a practical hedging strategy for the options. Further, the ... In practice, swing option owners do not always use this flexibility to ...
- What is swing option? definition and meaning
Definition of swing option: This is an agreement to buy or sell a certain amount of a commodity, at set periodic intervals, for a guaranteed price, during the length ...
- Pricing Swing Options and other Electricity Derivatives
is a swing option. It normally comes bundled with a base load forward contract and then leaves the consumer freedom to decrease or increase consumption ...