Intra-month price risk management with BALMO WTI Midland (WTT) and WTI Houston (HTT) vs. WTI futures
Key Features
- Flexibility to target exposure to certain days within a month
- Manage intra-month exposure from production or cargo volume variances
- Choose from calendar month or trade month structures
- Align hedges precisely to the timing of cargo loadings or tank transfers
- Netting with full month contract equivalent for margins and position limits
| Location | Period | Clearport | Related Full-Month Code |
|---|---|---|---|
| WTI Houston | Trade Month Balmo | HTB | HTT |
| WTI Houston | Calendar Month Balmo | HIB | HIL |
| WTI Midland | Trade Month Balmo | WTB | WTT |
| WTI Midland | Calendar Month Balmo | FFB | FF |
Use Cases for BALMO futures
EXAMPLE 1: PRODUCTION BALANCING
A trader has a term contract to buy production from a Midland basin producer at Argus WTI Midland. For calendar December, he sold 100,000 barrels of WTTZ22 to hedge his purchase. On November 16, he learns the December supply will be greater than expected at 104,000. He is now long 4,000 barrels and sells four lots of WTBV2216 to hedge his additional exposure.
EXAMPLE 2: CARGO BALANCING
A trader has agreed to buy a 700,000 barrel cargo of WTI Midland FOB Houston in December. To lock in Gulf Coast basis risk, he sells 700 HTTZ22. On November 12, his supplier informs him there will only be 695,000 barrels. He buys five lots of HTBV2212 to cover his short exposure.
Contract Pricing Day Example: WTI Houston (Argus) vs. WTI
| 27-Dec | 28-Dec | 29-Dec | 30-Dec | 02-Jan | 03-Jan | 04-Jan | 05-Jan | 06-Jan | 09-Jan | 10-Jan | 11-Jan | 12-Jan | 13-Jan | 17-Jan | 18-Jan | 19-Jan | 20-Jan | 23-Jan | 24-Jan | 25-Jan | 26-Jan | 27-Jan | 30-Jan | 31-Jan | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Trade Month Future | HTTG3 | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | ||||
| Trade Month BALMO | HTBF2306 | x | x | x | x | x | x | x | x | x | x | x | x | x | ||||||||||||
| Financial Future | HILF3 | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | x | ||||
| BALMO Financial Future | HIBF2311 | x | x | x | x | x | x | x | x | x | x | x | x | x | x |
BALMO Contract Listing Convention:
|
Contract Month |
Product Code |
Selected Start Date |
Termination of Trading |
Trade Month |
Related Full-month Product Code |
|---|---|---|---|---|---|
|
Aug 2022 |
HTBQ2229 |
8/29/2022 |
9/23/2022 |
September |
HTTV22 |
|
Sep 2022 |
HTBU2207 |
9/07/2022 |
9/23/2022 |
September |
HTTV22 |
|
Sep 2022 |
WTBU2227 |
9/27/2022 |
10/25/2022 |
October |
WTTX22 |
|
Oct 2022 |
WTBV2212 |
10/12/2022 |
10/25/2022 |
October |
WTTX22 |
For more information, please contact energy@cmegroup.com
Balance of the month cash settled futures contracts are based on the Argus daily assessment prices for WTI Houston and WTI Houston differential weighted averages.
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.
