transport model andy scale effect transport model explained use european option illustration raise underlying strike price amount use fuel percentage adjust strike net result intrinsic value decreases level goes fuel percentage high option premium actually increases level although intrinsic value decreases fuel percentage high 8 see decreasing option price transport deal fuel change often 5 see decreasing spread option price nymex moves think transport model still zimin following exmaple used r 6 vol 20 100 days see spreadsheet details forwarded zimin lu hou ect 10 20 2000 01 24 pm zimin lu 10 20 2000 10 45 andrew h lewis hou ect ect cc colleen sullivan hou ect ect stinson gibner hou ect ect subject level effect transport andy following spread sheet domenstrates leve effect transport valuation add nymex add delivery receipt price curve fuel adjustment keep everything else transport value pv spread options increases nymex add increases visit desk question zimin