Calendar Spread Options (CSOs) are options on the spread between two different futures expirations. The Energy futures term structure represents the time value of Energy market variables such as storage costs, seasonality, and supply/demand conditions. Calendar Spread Options provide a leveraged means of hedging against, or speculating on, a change in the shape of the futures term structure.
CME Group has a diverse product offering that includes Crude Oil, Natural Gas, and Refined Products CSOs. This article illustrates the main characteristics of CSOs and their applications in the Energy markets
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
