The New York Mercantile Exchange (NYMEX) has asked the Commodity Futures Trading Commission (CFTC) to approve two applications for electricity options contracts, one based on each of the futures contracts already under consideration by the CFTC. (This past summer, NYMEX applied to offer trading in two electricity futures contracts, one for delivery at the California-Oregon border, and the other for delivery at the Palo Verde switchyard in Arizona.)
Except for delivery location, the terms of the two contracts are identical. Strike prices would be listed in increments of one dollar per megawatt-hour, with five strike prices below and above the at-the-money strike price (the one closest to the previous day's futures settlement price), for a total of at least 11. As the at-the-money strike price moves, additional strike prices would be added. Prices would be quoted in dollars and cents per megawatt-hour and traded in multiples of one cent. There would be no limit on price fluctuations.
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