Hey everyone, need your help on whether or not I’ve understood this correctly. I’m fairly new to the industry so forgive me if this is too simplistic/silly.
If i’m a trader that is buying LNG priced at HH, and then selling that at TTF, am I short HH and long TTF?
The reason why i’m short HH is that if prices go up, I suffer since the gas i’m buying is now more expensive. Conversely, if the price of TTF goes up, I benefit since getting a higher price for the gas i’m selling.
Now given that, if I am to hedge these exposures, they have to be offsetting the physical exposures, so would I buy HH futures and sell TTF futures. Idea being, if HH goes up, I lose on the physical side (paying more) but gain on the futures side. Likewise, if TTF goes up, I gain on the physical side (get paid more for my gas), but I lose on the futures.
Is this the correct representation of my exposures and subsequent hedging strategy?
Many thanks!!