Seasonality is a big deal in the natural gas markets. My understanding is that they are broadly divided into summer and winter, with seasonality in both price and the volatility.

What does this translate into in terms of skews or volatility surfaces? What implications are there for hedging? And how do the options markets deal with the futures strips?

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    $\begingroup$ You might find Valuation and Risk Management in Energy Markets by Glen Swindle useful $\endgroup$ – user357269 Aug 30 '17 at 15:21

In terms of implied volatilities you will see that winter volatility carries a premium over summmer. Your vega hedging will be based on some sort of implied volatility correlational anaylsis between contract you are hedging and what you are hedging with.

Volatility surface will have peaks for winter months and troughs for summer months on the time dimension. Skew on a particular volatility is not affected by the premium of winter volatility over summer volatility.


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