A crucial component of energy trading strategy is risk management through rights, call, and put options intended to transfer financial risk between participants.
FREMONT, CA: Electricity and gas - as well as other energy commodities used in electricity generation - can be bought, sold, and marketed upon markets or exchanges through bids to buy, offers to sell, short-term trades, and financial instruments, for example, futures, forward contracts, and derivatives.
Every objective - immediate need, future price protection, risk mitigation - has been associated with energy trading tactics.
Typically energy trading comprises:
• SPOT TRADING - A deal in which delivery takes place immediately or with a minimum time between the trade and delivery because of technical restraints.
• FORWARD CONTRACTS - A forward contract is an agreement between two sides to exchange a provided quantity of a commodity at some set future date for a price determined today.
• FUTURES CONTRACTS - A futures contract is the same as a forward contract but is standardized regarding the quality, quantity, delivery time, and location of each commodity and transacted using a futures exchange.
• HEDGING - A strategy for reducing or transferring risk, usually executed via call or put options. More sophisticated techniques employ other derivatives or combinations of derivatives.
A crucial component of energy trading strategy is risk management through rights, call and put options intended to transfer financial risk between participants.
The Energy & Commodity Trading data model gives an integrated data architecture that supports energy trading organizations' trading and analytic requirements.
