Storage Optimization Model
WTM’s Storage Optimization Software (SOS)
With This Model, storage traders will now know how to actively trade natural gas so as to capture optimal value. Further, this model also gives storage traders the means of assessing how their proposed hedges protect total storage value, not just intrinsic value. The model does all this while fully accounting for ratchets, minimum requirements, fuel charges and demand charges. The model’s results include . . .
a value for the storage lease for the current gas inventory
a recommended physical trade for the current day a set of recommended hedges for protecting total storage value, both intrinsic and extrinsic
the VaR of storage value, which is a metric indicating how well total storage value is protected by the recommended hedges
a whole table of these same results over the whole range of possible inventory values, from zero injection to the maximum capacity. (Below are links to the User’s Manual for SOS and to the White Paper of the theory behind SOS that give more details on these results!)
This last result, the table, is what Will Take Managing storage to the next level: This table shows where the most valuable region of inventory levels is, and there may be more than one region.  But there is more! A VaR calculator is included for assessing total storage value protection on proposed hedges. What This Means is that traders are not forced to use the SOS recommended hedges; they may propose their own. And not only will the traders see the VaR of their proposed hedges, they will also be shown a minimal VaR under optimal hedging for comparison. Now traders are able to assess the tradeoffs of locking in spreads versus VaR.
Storage traders realize that extracting storage value means trading to high-optionality inventory levels, staying in those levels only for as long as is profitable, then recognizing and trading to the next set of levels with the highest optionality. The SOS model gives traders the results that help them find and trade to those regions; the other models do not. The SOS model also gives storage values based on such trading; the other models do not. Finally, the SOS model allows traders to assess the tradeoff of locking-in spreads versus protecting total storage value; the other models do not.
System Requirements – MS Excel, 2.5 gigahertz or above, 1 gigabyte of RAM. |
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Storage Model 
