Synthetic Storage

Phillip,

I'm building a sheet for each person specifically for financial hedging.
Each day it will pull in the previous days position and previous day price
curve to calculate the mark to market. Then that day's transactions can be
entered to calculate the P & L of transactions which close out previous
positions, as well as to calculate the new open positions. Initially, I
thought that daily P&L could be calculated by simply adjusting the P&L
whenever a transaction was made by the difference between the bid/offer of
the closed out position by the offer/bid of the new position (of course time
value and storage costs would be included). However, this only works if the
person is 100% hedged, meaning they do not have any open positions which
require marking. As the seller of synthetic storage utilizing 100% hedging,
I should be able to do this, except for the fact that I will have size limits
on transactions that will probably leave me open here and there.

The main question I have is simply, "Should I be calculating the P&L for each
person's storage book for open and closed positions?" Then beyond that, if
we do calculate the P&L's from the buyer side, it seems that if their storage
is not hedged, I will have to develop the market value of the storage in the
ground and the remaining capacity to mark to market it. So, I guess I could
apply the model for that purpose. Does this make sense to you? Any comments
are appreciated. Thanks.

Mat