Dutch gas options trade suggests market braced for volatility

Recent TTF options activity suggests that at least one counterparty is bracing for significant volatility on the Summer ’18 delivery contract, following the Dutch government’s decision to reduce the Groningen production cap by 10% for gas year 2017 (1 October 2017-30 September 2018).

According to ICE Endex data, open interest on each of the six monthly contracts delivering in summer 2018 rose by 3,000 contracts, 35%, on 18 April. On that day, the Dutch economy minister said he planned to cut the Groningen production cap by 10% in gas year 2017, to 21.6 billion cubic metres (bcm) see ESGM 18 April 2017.

ICIS looks at the fundamental drivers which could generate greater market volatility, and dissects which options trading strategy market participants may be employing.

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