- Overview of energy & electric power forward markets, terminology, price risk and the basics of energy and electricity trading.
- Liquidity risk, funding risk, credit risk and a brief discussion of Mark-to-Market accounting.
- What futures contracts are, and why and how they evolved.
- How physically-settled energy futures contracts are traded on both the NYMEX trading floor and electronically through the new NYMEX CME Globex platform.
- How cash-settled energy futures contracts are electronically traded on the ICE Futures Exchange and why the crude oil futures contract has been wildly successful.
- How the NYMEX futures exchange & its new computer trading system operates.
- Futures-related account maintenance, margin deposits, clearing and cash management issues.
- How buyers and sellers hedge natural gas price risk with NYMEX futures contracts.
- How to hedge electricity price risk with NYMEX natural gas futures contracts.
- What basis is, and what the different types of price spreads are.
- What basis risk is, and how it can destroy your futures hedge.
- How traders "basis trade" and why it works.
- The fundamentals of fixed-for-floating swaps, basis swaps, exchange indexed swaps, and contracts-for-differences.
- How over-the-counter dealers and institutional energy brokers operate.
- How electronic marketplaces such as ICE and NYMEX's Clearport Services work, how an Internet marketplace differs from an Internet futures exchange, who the CFTC and the United Kingdom's FSA regulates, and why these issues are important.
- The difference between financial and physical basis ("fin" and phys").
- Why so many industry participants use trigger deals.
- What EFP's are, and how and why this powerful tool is used by sophisticated traders.
- How the wholesale energy trading equation is defined, and what its implications are.
- How this equation underlies the structure of energy trading books.
- Puts and calls / Basic option terminology and concepts.
- The difference between exchange-traded, over-the-counter and physical energy options.
- What American, European and Asian style options are.How to create price caps and collars with exchange-traded options.
- How to calculate annualized volatility and why the BSM does not accurately price energy and electricity options.
- What the option Greeks are, and the basic concept of delta hedging.
- How to buy and sell volatility.
- Two examples of structured energy transactions.
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