Message-ID: <2212214.1075856529976.JavaMail.evans@thyme>
Date: Fri, 22 Dec 2000 09:01:00 -0800 (PST)
From: vince.kaminski@enron.com
To: vkaminski@aol.com
Subject: LNG Hedging
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---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 12/22/2000 
05:02 PM ---------------------------


Sandeep Kohli@ENRON_DEVELOPMENT
12/21/2000 04:33 AM
To: Vince J Kaminski@ECT
cc: Pinnamaneni Krishnarao@ECT 
Subject: LNG Hedging

Vince,

FYI.  This is something the team has been working on with Krishna.

Regards,
Sandeep.
---------------------- Forwarded by Sandeep Kohli/ENRON_DEVELOPMENT on 
12/21/2000 04:03 AM ---------------------------


Sandeep Kohli
12/21/2000 04:00 PM
To: James A Hughes/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc:  
Subject: LNG Hedging

Jim,

I am attaching below a small draft note prepared by Anshuman on LNG hedging.

It talks of two products: 
(1) Volumetric Options (where we buy a call on 100% of the volumes and sell a 
put on 50% of the volumes to finance the call), and
(2)  Ratio Derivative where we buy two calls at a higher price, and sell one 
at a lower price to finance it.  This is not one that the traders agree to, 
since at the upper price, the calls bought are just at the money, while the 
sold call is in the money, and will cost the seller.

Hence, only Option 1 is useful.  It could provide risk mitigation in the high 
price scenario, while allowing some participation in low prices.  To test it, 
we used March 2001 period.  To have it cost neutral, we would buy a call at 
$26, and sell the put at $25.15.  

As we bounce these ideas, I think it is very important that we work closely 
with the Global Markets group.  The team on the ground knows the contracts 
better, and maybe able to give you insights on what can be sold to MSEB.

Would love to discuss the same with you.

Regards,
Sandeep.