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  • Writer's pictureRyan Lynch

Alternative Fuels Update - Vol & Rho

The current macro-economic climate indicates inflationary price pressures on option values according to the mechanics of option price methodology (Binomial & B-S). With respect to both volatility (Vega) and interest rate risk (Rho), we have seen current geopolitical events as appreciatory for both, most especially in the energy and agriculture segments.

The current backwardated environment makes the investment risk for alternative fuels more profound. What if the selected propulsion is wrong, and backwardation "rolls up" on micro level fundamentals. This is a significant risk especially for ammonia type products with the fertilizer concerns and Russian/Ukrainian supply concentration.

Liquidity again does not increase the investment clarity but rather makes the concern even murkier, when activity concentrates at the front of the curve, and markets are as volitile as they are presently, the long term effects may prove destabilizing both for investment cycles and inflationary concerns.

MOIC 04 May
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