Investopedia explains 'Swing Option'
Swing options, also called swing contracts, take-and-pay options or variable base-load factor contracts, are most commonly used for the purchase of oil, natural gas and electricity. They can be used as a hedge by the option holder to protect against price changes in these commodities.
For example, a power company might use a swing option to manage changes in customer demand for electricity that occur throughout the month as temperatures rise and fall. These contracts are more intricate than they appear to be, making their valuation challenging.
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