Option Sale Market Price Contract Type
[Strike Price] > [Zonal/Hub Price] EXECUTE OPTION
[Strike Price] <= [Zonal/Hub Price] DON’T EXECUTE OPTION
This type of contract represents an option to sell energy (a "put" option) that is based on pricing in an area, hub, or hubs outside of the portfolio's own area. The option is exercised when the contract zone price (where the portfolio is located) or the hub price (defined by the Underlying Hub column) is less than the strike price, which is defined by the market price for an area, hub, or hubs in the Portfolio Contract table. The strike price can also be based on a fuel.
The amount of energy delivered is determined by [Energy Max]*[Monthly Shape]. The Energy Cost and Cost Shape fields can be used to model additional costs that are added to the strike price in the determination of whether or not the option is exercised. Note that in order for Energy Cost field to represent a cost for exercising a “put” option, it should be set to a negative value. There are four ways the strike price can be determined, only one of which should be specified for a given contract:
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If a Pricing Fuel is specified, then [Strike Price] = [Current Price of Pricing Fuel]*[Fuel Factor] + [Energy Cost]*[Cost Shape]
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If a Pricing Hub is specified, then [Strike Price] = [Hub Price]*[Hub Factor] + [Energy Cost]*[Cost Shape]
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If a Pricing Hub and a Pricing Hub 2 are specified, then [Strike Price] = ([Hub 1 Price]*[Hub 1 Factor] + [Hub 2 Price]*[Hub 2 Factor])/2 + [Energy Cost]*[Cost Shape]
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If a Pricing Area is specified for the contract, then [Strike Price] = [Zonal Price for the Pricing Area]
NOTE: The Energy Min column cannot be used in conjunction with this option type.
NOTE: To model a heat rate hedge contract, simply use this contract type and choose the fuel type being used for the heat rate conversion (the Fuel ID of a fuel in the Fuel Table) in the Pricing Fuel column, and use the heat rate divided by 1000 in the Fuel Factor column.
NOTE: Users can specify a monthly limit in hours in the optional Monthly Max field of the Portfolio Contract table. The value is multiplied by Energy Max to yield a MWh monthly limit.
Option Sale Market Price Contract Type
