|Index option (REMIT definitions)|
|European Union Electricity Market Glossary|
Pursuant to the REMIT Trade Reporting User Manual (TRUM) an index option is a call or put option contract in which the underlying asset is an index of any sort. For example, in a call, a market participant may buy the right to an index on or before the expiration date at a certain strike index.
Some options, both derivatives and not derivatives, related to physical delivery of gas or electricity are traded on the basis that the option may be exercised against an index or reference price upon its publication.
The relevant data are reported for instance in the Data Field No (37) of the non-standard reporting form (Option strike index), which is purported to identify the name of the strike index used in the index option embedded in the contract.
According to the TRUM option strike index types are the following:
SP=Spot FW=Forward style contract FU=Future style contract OP=Option style contract OP_FW=Option on a forward OP_FU=Option on a future OP_SW=Option on a swap SP=Spread SW=Swap (financial) OT=Other.
The TRUM description for the Data Field 38 (Option strike index type) is as follows:
"This field identifies the type of strike index of the option used in the contract as reported in field 37. For each index, market participants shall specify the type of index.
For example, if the index is a spot price published by an exchange the "SP" value shall be reported. If the index is published by a price reporting agency or other publisher and it represents the delivery of the energy commodity during the course of a specific day, week, weekend, month etc., than the "FW" value shall be reported. If the index is a future price published by an exchange the "FU" value shall be reported. Same applies to the other values indicated in the table above.
Where the contract has several indexes and where each of them may be used to exercise the right to buy or sell the energy commodity, market participants shall report the type of index used against which the option can be exercised per each index reported field 37 (option strike index). For example:
1. The spot price published by Exchange ABC may be used to exercise the option from 01/01/2015 to 31/12/2017;
2. The index value for a forward contract published by Publisher 123 may be used to exercise the option from 01/04/2015 to 31/03/2018; and
3. Future price published by Exchange XYZ may be used to exercise the option from 01/04/2016 to 31/03/2019.
In this case "SP", "FW" and "FU" shall be reported in this field."
|Last Updated on Friday, 05 February 2016 11:11|