Energy/Electricity Futures, Options & Derivatives Seminar

This proven program is for energy and electric power professionals who are looking for a comprehensive and clearly explained understanding of natural gas, oil and electricity financial instruments, the markets they trade in, and how these powerful tools can be used to manage risk and structure profitable transactions.

What You Will Learn

• How to use futures contracts, options, swaps, trigger deals, "The Master Energy Hedging Equation" and other techniques to create customized risk management solutions to protect your company from natural gas, oil and electricity price risk, basis & LMP risk, delivery risk and volumetric (intermittency) risk.
• How physical and cash settled futures contracts, over-the-counter energy swaps and physical forward contracts are traded and the purposes served by these markets.
• How the ICE and CME-NYMEX futures exchanges and electronic marketplaces function, and what the differences are between ICE OTC, ICE Futures, CME Globex, CME Clearport Services and The Nodal Exchange.
• How "cash margining" is done with a futures exchange, its cash management impact and the role of the Clearinghouse.
• What the differences are between a futures commission merchant ("FCM"), over-the-counter broker, trader, market-maker, power marketer and wholesale energy merchant.
• What basis risk is, and how basis, spread, LMP and delivery risks can blow up your energy and electricity hedges.
• Why Trigger Deals are so popular, and what the difference is between the financial and physical basis ("fin" and "phys").
• How to structure profitable energy, electric power, and petroleum transactions without exposure to price risk; and how to financially turn one commodity into another.
• How to make money by buying valuable energy options from your customers and suppliers, and how your company may be missing a significant financial opportunity.
• Why "extendible" deals can be profitable, and how energy trading floors "trade around assets."
• What the terms "Contango" and "Backwardation" mean.

What You Will Also Learn

• "Puts", "Calls", extrinsic value and other energy option terminology and concepts.
• The difference between exchange-traded, over-the-counter and physical energy/electricity options.
• What American, European and Asian style options are.
• Why one should rarely exercise an option before its expiration date.
• Mean reversion & price jumps--Why the Black and Black-Scholes option pricing models may not accurately price energy and electricity options.
• The services often used to price energy options.
• The methodology used to calculate "annualized volatility" for the energy markets.
• The important implications of high energy price volatility
• Why trading energy and electricity is different from the trading equities, bonds and other commodities.
• The many different types of energy and electricity trading.
• Why traders specialize, and the different ways energy traders can get an "edge" on the competition.
• How the many types of energy & electricity trading can be summarized by one simple three dimensional graph and "The Master Energy Trading Equation."
• Why many traders trade the 'basis" or price spreads, and how it works.
• Why merchant energy and electric power assets are valuable call options on spreads.
• What asset "optionality" means.
• What the terms "Contango" and "Backwardation" mean, and how the energy "carry trade" works.
• Why having ownership or contractual control of physical energy assets gives a significant advantage to a trading company.
• What "trading around assets" means
• Why merchant assets are call options on location, calendar, and product price spreads.
• A simple rule that will optimize your daily decisions on whether to use or idle a merchant electric generator, energy storage facility or transmission asset.
• Three detailed examples of how to trade around energy transmission, storage, and generating assets
• What a "tolling deal" is.
• What "structured transactions" are, and why they can be a "win/win" for all parties involved.
• How energy and power marketers make money by buying valuable energy options from their customers and suppliers, and how your company may be missing a significant financial opportunity.
• What "extendible" deals are, and why they are so profitable for energy marketing companies.
• How to create price caps, price floors and "no cost" collars with energy options.
• What the option "Greeks" are, and the basic concept of delta hedging.
• The basics of the valuable put-call option parity equation,.
• Four common "synthetic option" positions, and why it is worthwhile to know them.

Who Should Attend this Seminar

Among those who will benefit from this seminar include energy and electric power executives; attorneys; government regulators; traders & trading support staff; marketing, sales, purchasing & risk management personnel; accountants & auditors; plant operators; engineers; and corporate planners. Types of companies that typically attend this program include energy producers and marketers; utilities; banks & financial houses; industrial companies; accounting, consulting & law firms; municipal utilities; government regulators and electric generators.

Prerequisites and Advance Preparation
This fundamental level group live seminar has no prerequisites. No advance preparation is required before the seminar.

Program Level & Delivery Method
Basic level. This fundamental course begins with basic material and then proceeds to the intermediate level. Delivery method is "Group-Live."