I'm reading through the notes on the financial statements of Cheniere to try and understand how a typical US-based LNG facility hedges. They mention that they use option pricing models and different derivatives to hedge their facility but they don't stop and explain the basics for newbies like me. Like what is the point of the hedge and in general how is it executed?
Can someone give the general idea behind how LNG facilities hedge? To make it simple, I'm just thinking about US facilities. What derivative trades are they doing in general to hedge LNG output?