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This proven program is for 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.
Includes a discussion of the major market changes that are occurring as the result of the Dodd-Frank Act and the CME-ICE decision to list many of their OTC swaps as energy swap futures contracts.
What you will learn:
- How to use futures contracts, options, swaps, trigger deals and EFPs to protect your company from natural gas, oil and electricity price risk.
- How physical and cash settled futures contracts, over-the-counter energy swaps, and physical forward contracts are traded.
- How the NYMEX futures & options markets operate, and how electronic marketplaces and electronic futures exchanges such as ICE, NYMEX CME Globex, and NYMEX Clearport Services work.
- How buyers and sellers can use natural gas futures and options to create price hedges, price caps, price floors, and "no-cost" collars to manage both natural gas and electricity price risk.
- What basis risk is and how basis and delivery risk can destroy your hedging program.
- How to structure profitable energy and electric power transactions without exposure to price risk, and what "trading around assets" means.
- A summary of industry clearing procedures and deal contract language.
- The difference between brokers, traders, dealers, market-makers, marketers and wholesale energy merchants.
- Why most energy and power traders prefer to execute hub-referenced transactions instead of doing point-to-point deals.
- How electricity futures and derivatives are impacting the forward electric power markets.
- How basis trading, volatility trading, structured transactions and EFPs work, and how over-the-counter energy dealers make markets.
- How heat-rate-linked power transactions can effectively convert natural gas futures, options, swaps and other financial instruments into electric power derivatives.
- The Master Energy Trading Equation and why trading energy is different from trading financial products and other commodities.
- The basics of energy and electricity options, the implications of high energy price volatility, and why energy and electric power assets are really options in disguise.
- How to hedge energy price risk with NYMEX options contracts.
- How to calculate annualized volatility, the fundamentals of pricing options and why the Black Scholes model doesn't work for pricing energy and electricity options.
- The put-call option parity equation, synthetic option positions, and how to delta hedge.