thanks man,, please reserve this for gallon card posts,, feel free to post in other threads regarding that
I read most of the posts... @Overnight has some very good points about locality etc. The idea is good, everybody is interested in discounts/cheaper fuel. But, how do you plan to hedge? That's your main problem. Say you will use RBOB futures. This means you don't actually have to purchase physical. But, you'll be hedging spot with longer dated. So which futures do you pick? Term-structure problems will arise. Transport companies, like airlines etc, don't have that problem because they more or less know the qty of fuel they will need and use. You will not know the qty, because the client can potentially wait forever. Unless you put an expiry on the purchases... (use within 90 days?) but that might stop clients from using it. And on top of that, some components can't really be hedged IMO. The amount of taxes on fuel is one. What if Federal/State decides on higher taxes?
I agree, none of this adds up and the guy is obviously a liar with the story he made up on linked in being a hedge fund manager.
the points are very good, the Empirical formula is that the futures that would be picked would be the farthest ones only if their price difference from spot is not drastic, or the near future ones with constantly rolling them over to the next one,, this however poses the problem of contango and backwardation,,, the ultimate and last choice again would be to put a time limit like u said but that will turn away some customers,,, we might not know the exact quantity but as the business becomes established it could be projected and estimated to a near number or a geographical zone,,, additionally,, we could price it like futures for the cusotmers if must where gas is more expensive for those wanting to have near infinite expiration date,,,, dont forget the longer the customers takes to redeem the longer money earns money on interest and options decay as well and any other stuff that might be deployed,,, this is the first goal is to have no expiration date on the gallons