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Selected methods of securing the refining sector against crude oil price fluctuations Cover

Selected methods of securing the refining sector against crude oil price fluctuations

International Journal of Management and Economics
Volume 54 (2018): Issue 3 (September 2018)
By: Bartosz Łamasz,  Natalia Iwaszczuk and  Oleksandr Ivashchuk  
Open Access
|Sep 2018

Figures & Tables

Figure 1

Short butterfly spread strategy example. Source: own elaboration.
Short butterfly spread strategy example. Source: own elaboration.

Figure 2

Example of long strip strategy. Source: own elaboration.
Example of long strip strategy. Source: own elaboration.

Figure 3

Example of long strap strategy. Source: own elaboration.
Example of long strap strategy. Source: own elaboration.

Percentage changes (MOM) of WTI crude oil prices in the construction of strategy during the period of activity of the options

Change (month on month)
Above 10%5%–10%Less than 5%
IncreaseDecreaseIncreaseDecreaseIncreaseDecrease
02.2015 (11.52%)12.201405.2015 (6.59%)08.201409.2014 (0.45%)07.2014
(–26.89%)(–5.49%)(–2.65%)
04.2015 (19.39%)01.201508.2016 (5.15%)10.201410.2015 (4.22%)06.2015
(–12.65%)(–9.62%)(–0.96%)
09.2015 (15.80%)03.201510.2016 (9.76%)11.201402.2016 (3.93%)04.2016
(–12.20%)(–6.04%)(–2.75%)
03.2016 (20.19%)07.201512.2016 (7.16%)11.201502.2017 (0.21%)06.2016
(–16.54%)(–9.62%)(–3.73%)
05.2016 (12.35%)08.201504.2017 (9.69%)07.201608.2017 (2.37%)01.2017
(–14.55%)(–6.22%)(–0.04%)
01.2018 (10.29%)12.201507.2017 (8.28%)09.201609.2017 (2.87%)05.2017
(–14.41%)(–9.52%)(–0.87%)
01.201611.2017 (7.12%)03.201710.2017 (2.73%)03.2018
(–13.33%)(–8.88%)(–0.41%)
11.201602.201812.2017 (1.86%)
(–10.18%)(–5.18%)
06.2017
(–13.67%)

The median values (USDs per barrel) achieved in crude oil price fluctuations exceeding 10% (Category 1)

StrategiesVariantUSD/barrel
Long positionShort position
Long stripATM+10% (C) + 2× ATM+10% (P)8.52
Long stripATM+5% (C) + 2× ATM+5% (P)7.09
Long stripATM (C)+ 2× ATM (P)4.35
Long strap2× ATM+10% (C) + ATM+10% (P)3.29
Long stripATM-5% (C)+ 2× ATM-5% (P)3.24
Short butterfly spread2× ATM+5%ATM-10% + ATM+10%2.87
Long strap2× ATM (C) + ATM (P)2.56
Long strap2× ATM+5% (C)+ ATM+5% (P)2.33
Short butterfly spread2× ATMATM-10% + ATM+5%1.73
Short butterfly spread2× ATMATM-10% + ATM+10%1.65
Short butterfly spread2× ATM+5%ATM-5% + ATM+10%1.52
Long stripATM-10% (C) + 2× ATM-10% (P)1.07
Short butterfly spread2× ATMATM-5% + ATM+5%0.45
Short butterfly spread2× ATM+5%ATM + ATM+10%0.40
Short butterfly spread2× ATM-5%ATM-10% + ATM0.29
Short butterfly spread2× ATMATM-5% + ATM+10%0.13
Short butterfly spread2× ATM-5%ATM-10% + ATM+5%–0.38
Short butterfly spread2× ATM-5%ATM-10% + ATM+10%–0.93
Long strap2× ATM-5% (C) + ATM-5% (P)–1.33
Long strap2× ATM-10% (C) + ATM-10% (P)–6.39

The results (USDs per barrel) and statistics for the best long strip strategy in Category 1

MonthChanges (MoM, %)Options
ATM+10%ATM+5%ATM
12.2014–26.89%40.5838.9335.08
01.2015–12.65%10.868.775.02
02.201511.52%–15.09–8.63–3.19
03.2015–12.20%8.525.932.62
04.201519.39%–8.64–2.412.74
07.2015–16.54%18.8817.0013.75
08.2015–14.55%14.1211.998.36
09.201515.80%–5.79–1.232.16
12.2015–14.41%10.969.306.74
01.2016–13.33%8.237.275.11
03.201620.19%–7.86–5.10–2.71
05.201612.35%–9.10–3.81–0.64
11.2016–10.18%8.617.094.35
06.2017–13.67%13.0811.849.50
01.201810.29%–12.02–4.152.10
Median8.527.094.35
Mean5.026.196.07
Standard deviation14.8211.829.20
Number of losses663
Number of profits9912
Pearson correlation coefficient for changes and results–0.91–0.85–0.71

The results achieved in short butterfly spread, depending on the price level of the underlying instrument on the expiry date of the option

IntervalShort call butterfly spreadShort put butterfly spread
[0;K1)−c(K1 ) + 2c(K0 ) − c(K2 )K2 − 2K0 + K1 − p(K1 ) + 2 p(K0 ) − p(K2 )
[K1 ;K0 )K1 − f T − c ( K1 ) + 2 c ( K0 ) − c ( K2 )K2 + f T − 2 K0 − p ( K1 ) + 2 p ( K0 ) − p ( K2 )
[K0 ;K2 )2 K0 − f T − K1 − c ( K1 ) + 2 c ( K0 ) − c ( K2 )K2 − f T − p ( K1 ) + 2 p ( K0 ) − p ( K2 )
[K2 ;∞)−K2 + 2K0 − K1 − c(K1 ) + 2c(K0 ) − c(K2 )− p(K1 ) + 2 p(K0 ) − p(K2 )

Median values (USDs per barrel) achieved in crude oil price changes ranging from 5% to 10% (Category 2)

StrategyVariantUSD/ barrel
Long positionnShort position
Long stripATM+10% (C) + 2× ATM+10% (P)6.25
Long stripATM+5% (C) + 2× ATM+5% (P)5.10
Long strap2× ATM+10% (C) + ATM+10% (P)2.85
Short butterfly spread2× ATM+5%ATM-10% + ATM+10%2.46
Short butterfly spread2× ATM+5%ATM-5% + ATM+10%1.76
Long strip2× ATM (P) + ATM (C)1.68
Long strap2× ATM (C) + ATM (P)1.50
Short butterfly spread2× ATMATM-10% + ATM+10%1.31
Long strap2× ATM+5% (C) + ATM+5% (P)1.21
Short butterfly spread2× ATMATM-5% + ATM+10%1.18
Short butterfly spread2× ATMATM-10% + ATM+5%0.56
Short butterfly spread2× ATMATM-5% + ATM+5%0.53
Short butterfly spread2× ATM-5%ATM-10% + ATM0.45
Short butterfly spread2× ATM +5%ATM + ATM+10%0.38
Short butterfly spread2× ATM-5%ATM-10% + ATM+5%–0.39
Short butterfly spread2× ATM-5%ATM-10% + ATM+10%–0.59
Long stripATM-5% (C) + 2× ATM-5% (P)–0.90
Long stripATM-10% (C) + 2× ATM-10% (P)–3.43
Long strap2× ATM-5% (C) + ATM-5% (P)–3.48
Long strap2× ATM-10% (C) + ATM-10% (P)–6.62

Median values (USDs per barrel) achieved in crude oil price changes below 5% (Category 3)

StrategiesVariantUSD/barrel
Long positionShort position
Short butterfly spread2× ATM-5%ATM-10% + ATM0.37
Short butterfly spread2× ATM+5%ATM + ATM+10%0.12
Short butterfly spread2× ATM-5%ATM-10% + ATM+5%–0.02
Short butterfly spread2× ATM-5%ATM-10% + ATM+10%–0.46
Long stripATM-10% (C) + 2× ATM-10% (P)–0.66
Short butterfly spread2× ATMATM-5% + ATM+5%–0.80
Short butterfly spread2× ATM+5%ATM-5% + ATM+10%–0.81
Long strap2× ATM-10% (C) + ATM-10% (P)–0.99
Short butterfly spread2× ATMATM-5% + ATM+10%–1.13
Short butterfly spread2× ATMATM-10% + ATM+5%–1.17
Long strap2× ATM+10% (C) + ATM+10% (P)–1.23
Long stripATM-5% (C) + 2× ATM-5% (P)–1.25
Short butterfly spread2× ATM+5%ATM-10% + ATM+10%–1.26
Short butterfly spread2× ATMATM-10% + ATM+10%–1.63
Long strap2× ATM-5% (C) + ATM-5% (P)–1.67
Long stripATM+10% (C) + 2× ATM+10% (P)–1.75
Long strap2× ATM+5% (C) + ATM+5% (P)–2.34
Long stripATM+5% (C) + 2× ATM+5% (P)–2.59
Long strap2× ATM (C) + ATM (P)–3.48
Long stripATM (C) + 2× ATM (P)–3.72
DOI: https://doi.org/10.2478/ijme-2018-0020 | Journal eISSN: 2543-5361 | Journal ISSN: 2299-9701
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Language: English
Page range: 197 - 209
Submitted on: Jun 30, 2018
Accepted on: Sep 5, 2018
Published on: Sep 30, 2018
Published by: Warsaw School of Economics
In partnership with: Paradigm Publishing Services
Publication frequency: 4 issues per year
Keywords:
price risk,
commodity options,
option strategies
Related subjects:
Business and economics,
Political economics,
Economic theory, systems and structures,
Business management,
Management accounting, financial controlling, cost calculation, investment

© 2018 Bartosz Łamasz, Natalia Iwaszczuk, Oleksandr Ivashchuk, published by Warsaw School of Economics
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

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