ignificant, sometimes abrupt, changes in supply, demand, and pricing have touchedmany of the world’s commodity markets during the past 25 years, especially those forenergy. International politics, war, changing economic patterns, and structural changeswithin the energy industry have created considerable uncertainty as to the future directionof market conditions. Uncertainty, in turn, leads to market volatility, and the need for aneffective means to hedge the risk of adverse price exposure.The principal risk management instruments available to participants in the energy mar-kets today are the versatile futures and options contracts listed on the New York MercantileExchange. The contracts are designed to meet the needs of the modern energy industry byencompassing the standards and practices of a broad cross-section of the trade.The Exchange is the world’s largest physical commodity futures exchange. Trading isconducted through two divisions: the NYMEX Division offers futures and options contractsfor light, sweet crude oil; heating oil; New York Harbor gasoline; natural gas; electricity; andplatinum; futures for propane, palladium, sour crude oil, Gulf Coast unleaded gasoline; andand options contracts on the price differentials between heating oil and crude oil, and NewYork Harbor gasoline and crude oil, which are known as crack spread options.The COMEX Division lists futures and options on gold, silver, copper, aluminum, andthe FTSE Eurotop 100
European stock index; and futures for the FTSE Eurotop 300
stock index.The NYMEX Division heating oil futures contract, the world’s first successful energyfutures contact, was introduced in 1978. The light, sweet crude oil contact, launched in1983, is the most actively traded futures contract based on a physical commodity in theworld. These contracts, and the others that make up the Exchange’s energy complex havebeen adopted as pricing benchmarks in energy markets worldwide.
The Exchange’s electronic trading system, NYMEX ACCESS
, allows trading inenergy futures and options, platinum futures and options, and other metals futures after thetrading floor has closed for the day. The NYMEX ACCESS
trading session for light, sweetcrude oil; heating oil; New York Harbor unleaded gasoline; and the metals contracts beginsat 4 P.M. and concludes at 8 A.M. the following morning, Mondays through Thursdays. ASunday evening session commences at 7 P.M. When combined with the daily open outcrysession, NYMEX ACCESS
extends the trading day to approximately 22 hours.
NTRODUCTION TO THE