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Financial Transmission Rights (FTR) Reports



ZE Volatility Reports provide users with complete descriptions and presentations of implied volatility and historical volatility data for major energy commodity (natural gas, electricity, oil) market prices in North America. Price volatility is presented in several forms with each volatility measure providing unique insights about the underlying commodity.

Volatility Smile: Implied volatility versus option strike price. The reports present daily snapshots of volatility smile for options contracts with strike dates for 1-month ahead, 3-month ahead, and 1-year ahead, as well as at-the-money (ATM) prices for 1-month ahead, 3-month ahead, and 1-year ahead.

Evolution of Commodity Futures Price. Forward curve for the underlying commodity price is provided for easy reference of ATM prices for current options contracts. The evolution of the forward curve is depicted by comparing it to forward curves generated the week previous, and three months previous. Evolution of Volatility Smile. For options contracts ending one month from the report date, three volatility smiles are compared to show how the smile has changed over time (volatility smiles generated for day of report, from previous week, and three months ago) Evolution of Three-Month Volatility Smile. For options contracts ending three months from the report date, three volatility smiles are compared to show how the smile has changed over time (volatility smiles generated for day of report, from previous week, and three months ago)
Volatility Term: implied volatility versus expiration date for at-the money (ATM) options. ATM condition is determined based on options that have strike prices equal to futures prices on the contract expiration date. The reports compare volatility term for report date, past week, and past 3-months.

Evolution of Commodity Futures Price. Forward curve for the underlying commodity price is provided for easy reference of ATM prices for current options contracts. The evolution of the forward curve is depicted by comparing it to forward curves generated the week previous, and three months previous. Volatility Term by Moneyness: volatility term curve is provided for moneyeness of +10%, +20%, -10%, -20%.
Volatility Surface: a comparison of implied volatility as a function of both strike price and time to maturity resulting in a plot of a three-dimensional surface.

This is useful in quickly identifying under what conditions implied volatilities appear overvalued or undervalued. Represents a ‘snapshot’ in time of implied volatility and hence, option prices, based on contract strike prices and maturities. Calculations are performed using ZE proprietary algorithms, which also perform filtering of bad data and interpolation of calculated volatilities.
Volatility Cone: a comparison of implied volatility to historical volatility enables the relative valuation of option prices compared to historic patterns.

A common method of comparing implied volatility with historical volatility is to present distributions of historical volatility as a ‘cone’, and then superimpose volatility terms, which are based on implied volatility. Volatility Cone (max, min, average historical volatility vs. days to expiration) with Volatility Terms (ATM, in-the-money, and out-of-the money options) Volatility Cone (max, min, average historical volatility vs. days to expiration) and Historical Volatility (volatility for Current N Days Historical Volatility) Historical Volatility: historical 30-day volatility and Inverse historical 30-day volatility (movement in HV for last 30 days)
30-Day Implied Volatility Index (Henry Hub natural gas only): the ZE 30-day implied volatility index for Henry Hub natural gas prices is based on the same methodology used by the Chicago Board Options Exchange to calculate its CBOE Volatility Index (benchmark index for stock market volatility).

The index is based on real-time option prices, which reflect investors' consensus view of future expected natural gas market volatility.
Options Greeks (Henry Hub natural gas only): estimate trading risks when trading options. Each Greek represents the sensitivity of option values to changes in an underlying parameter.

Surfaces are constructed for set range of strike prices with expiration date for 1-year-ahead contract. Delta Surfaces - sensitivity of options values to changes in the price of the underlying commodity. Gamma Surfaces - sensitivity of options values to the rate of change in an option’s Delta. Vega Surfaces - sensitivity of options values to changes in volatility of the underlying commodity. Theta Surfaces - sensitivity of options values to time, or an option’s time decay. Rho Surfaces - sensitivity of options values to changes in the risk-free rate.
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