Natural Gas Derivatives and Trading
Henry Hub, TTF; seasonal spreads, spark spread, basis risk; hedging for producers and utilities
Natural Gas Derivatives and Trading
Executive Summary
Natural gas has standardised futures and related derivatives that allow hedging and speculation. The main contract is Henry Hub (US), traded on NYMEX. European TTF (Title Transfer Facility) and Asian LNG contracts are becoming more important. Utilities hedging winter heating, power plants managing gas cost, and producers locking in selling prices all use these instruments. This module covers gas futures specifications, seasonal patterns and spread trading, spark spreads, basis risk, and hedging for the main participant types. For practitioners and consultants, it supports gas risk management and programme design.
Learning Objectives
By the end of this module you will be able to understand natural gas futures contracts: Henry Hub, European TTF, and Asian LNG, analyse seasonal patterns in natural gas and exploit with spreads, evaluate hedging strategies for producers, utilities, and traders, design spark spreads (gas-to-power) and their role in power generation, and manage basis risk for natural gas in different delivery locations.