Everyone knows that the market is bearish, because there appears to be no shortage of supply, everyone has broken limits and got themselves long and the fundamental fuel supply, i.e. Gas and Coal is coming off as well. So given all of this are there trading opportunities. Perhaps because of the volatility in the market and the speed of the descent, there are more opportunities than a full on curve shift.

For example you can buy September for £35.50 and November for £50. This is quite a large differential between the two months. Gas prices are 34.8p/therm and 56.9p/therm respectively which may explain some of the large differential, the spark spread is set at 11.33 for September and 10.48 for November. If you were a spark spread trader you would sell September (sell power and buy gas) and buy November spark (buy power and sell gas) as you put pressure on November gas prices this will start to narrow the gas spread and power traders may react to this by narrowing the power differential. Furthermore the fundamentals have suggested that gas and power prices have always traded high in November in case of a cold snap. Historically the cold snap does not arrive in November. Which ever way you look at the market the differentials look wide and should be narrower. Perhaps the only reason for staying this wide is spark spread traders falsely persuing somthing which will never out turn at this level. If carbon prices continue to fall the fundamental level of £10/MWh for spark is very high.