BUSINESS AREAS
No matter what industry you are part of, you still need to secure your budgets from getting out of hand...
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Caps
A Cap is a paper hedge agreement designed to protect you from rising prices, yet allows you to benefit from falling prices. Also known as "call option".
Two good reasons to use this strategy:
- Rising fuel prices would seriously undermine your business
- You would like to benefit from falling prices after having fixed your maximum fuel prices
| Benefits | Disadvantages |
| Protection from price increases | Premium upfront |
| Benefit from falling fuel prices | Potentially some basis risk |
| Flexibility in physical supply |