 This many lecture will just go over some of the key points that were made in the narrative that preceded it, as well as the example on the preceding spreadsheet. We're talking about financial energy derivatives, and one of those derivatives is known as a swap. A swap is merely an exchange of payments between two parties. It can be a form of hedging, or it can be outright trading. Speculative traders will trade in swaps all the time, again just buying and selling with the hopes of making some money. These are referred to as over-the-counter. They are not traded on a legal exchange such as the New York Mercantile Exchange or the Chicago Mercantile Exchange. They can be traded over electronic platforms such as the Intercontinental Exchange or the International Petroleum Exchange in London. Or we can obtain swaps agreements with voice brokers, the declaring type of brokers that you call up over the phone, and they arrange for a swap counterparty and merely extract a fee for putting the two counterparties together. They are definitely strictly financial. This is an important aspect of swaps. There's no physical commodity exchanged. So unlike the NIMEX contracts for energy commodities, there's no potential obligation to either make or take delivery of the commodity itself. The term that we use is fixed for floating. In an energy financial derivative swap, one party is going to pay a fixed price. What is the fixed price? The fixed price is the market price today. It's a known price. It's the agreed upon price, which is the starting point for the ultimate exchange of payments. The other party then pays the floating price. What is the floating price? The floating price is what is the unknown price at the time that the swap agreement is agreed to. The floating price is going to be the settlement price for the corresponding NIMEX energy commodity. So the market price of that commodity is going to float up and down between the time that the swaps agreement was executed and the actual settlement of the corresponding energy commodity. When we're using New York Mercantile Exchange contracts as the derivative under a swaps agreement, we refer to them as NIMEX look-alike. So in the case of natural gas, the Henry Hub financial swap, one part of your buys and sells at the current market price for natural gas and the other buys or sells at the actual NIMEX settlement. The difference between those two prices is settled every month and again there's no physical receipt or deliveries. There's another special type of swap that is strictly related to natural gas contracts. It's known as the basis swap. A basis swap represents the financial difference between the Henry Hub in Louisiana as the physical delivery point for NIMEX contracts for natural gas and any other market pricing point in the country. If you recall in cash pricing lesson I talked about the inside FERC publication and the gas daily publications and those are the prices that are posted for various market points in the cash market for natural gas. So as you can see if you were to review those, you'll find that those prices differ from the NIMEX because the NIMEX price is in essence situated in southern Louisiana. So a basis swap is a financial derivative instrument that can help offset that price. It represents the price difference between the Henry Hub and a different cash market location price. We use the inside FERC first of the month posting versus the final NIMEX settlement for the proper month contract. In other words, on the inside FERC we look at the cash price when it comes out and we compare that to the NIMEX settlement price and that represents the value of the basis swap itself. That represents the settlement price. A swing swap is just another form of swap that occurs within the month. So let's just say for instance you might be a producer of natural gas, you're bringing on a new well but you're not bringing it on until the fifth of the month. Well at that point in time you can't get an inside FERC index for it. You could sell it at the gas daily daily postings that come out or if you choose to get a fixed price, if you would like a fixed price for your gas for the remaining part of that month, the buyer of the gas is going to have to go out and hedge it and they're going to have to hedge it using some type of fixed price financial derivative. In the case of natural gas we use swing swaps. These are tied to the gas daily postings. In other words, the fixed price that is offered to the producer in this case is settled every day with the actual cash price as posted in the gas daily daily newsletters.