Options may look attractive, but it might be worth looking in detail at all the costs associated with entering into this kind of insurance premium.
There appear to be a number of options markets being developed in the Uk power market. Spectron have been promoting a Winter 06 Call market with at the money calls. (i.e the strike price is at the same level as the current price) bid at around 44% this is 6% below the volatility being traded just before Christmas. There is also a in the money call offered at around 48% which looks high and so one would expect market value at around 45.5%.
A large retailer if uncovered for the next Winter could buy one of these options with the chance to insure against an upside move. If they bought the right but not the obligation to trade at £66, this would mean that at the end of September if the market was at £100 they could exercise their option and buy power at £66. If the market collapsed they would let the option expire worthless.
The insurance premium is around £9/MWh so it is expensive but with market volatility as high as it is, there is every chance of the market at some point reaching £100.
19 September 2006
Some of the long dated products look like bargains but are there other ways of buying this. read more...
14 November 2005
The market is becoming more volatile less liquid and players are spooked, it is not broken, it is just more scary to operate it. read more...
23 June 2005
The differences between Winter and Summer are getting narrower, but this may indirectly cause more problems. If the Swiss trains stop what next? read more...
22 June 2005
Alice: "It would be so nice if something made sense for a change." read more...
Shale Gas - Latest UK estimates suggest enough for next 11 years
Cuadrilla Resources, the company at the forefront of Britain's Shale gas exploration released its first estimates of the amount of shale gas contained in the rocks of Lancashire. At 200 trillion cubic feet, the estimates are significant to say the least. read more...
22 September 2011
Cuadrilla Resources, the company at the forefront of Britain's Shale gas exploration released its first estimates of the amount of shale gas contained in the rocks of Lancashire. At 200 trillion cubic feet, the estimates are significant to say the least. read more...
2nd Quarter Growth at 1.1%; What Role For Energy
Preliminary figures from the Office for National Statistics (ONS) suggests the UK economy grew by 1.1% in the second quarter, up from the previous quarter's 0.3%. While the figures are preliminary (and based on around 40% of the ultimate data), what they do show is that construction, a relatively small part of the economy, contributed significantly to this growth figure. With 6 out of 10 civil engineering firms looking to the energy and water sectors for their income streams, it seems energy has a role to play in underpinning the recovery. read more...
23 July 2010
Preliminary figures from the Office for National Statistics (ONS) suggests the UK economy grew by 1.1% in the second quarter, up from the previous quarter's 0.3%. While the figures are preliminary (and based on around 40% of the ultimate data), what they do show is that construction, a relatively small part of the economy, contributed significantly to this growth figure. With 6 out of 10 civil engineering firms looking to the energy and water sectors for their income streams, it seems energy has a role to play in underpinning the recovery. read more...
Green Investment Bank still a Concept
Leading figures from across industry warned that the need for new tools to finance future investment in infrastructure are necessary to secure Britain's growth as a low carbon economy. While the coalitions Green Investment Bank (GIB) is supported, it is important to recognise that it is still at present only a concept. read more...
16 July 2010
Leading figures from across industry warned that the need for new tools to finance future investment in infrastructure are necessary to secure Britain's growth as a low carbon economy. While the coalitions Green Investment Bank (GIB) is supported, it is important to recognise that it is still at present only a concept. read more...
Suddenly it's "British Petroleum"
A name not used in a very long time, but suddenly the US are quick to refer to BP by its old name of British Petroleum, hoping perhaps to distance itself from blame regarding the disastrous oil spill in the Gulf of Mexico. But as the US announces a criminal investigation and as BP shares suffer further should the British economy concern itself? read more...
02 June 2010
A name not used in a very long time, but suddenly the US are quick to refer to BP by its old name of British Petroleum, hoping perhaps to distance itself from blame regarding the disastrous oil spill in the Gulf of Mexico. But as the US announces a criminal investigation and as BP shares suffer further should the British economy concern itself? read more...
A Week for Releasing Figures
With the political debate heating up; more 'head to heads' scheduled and with the News Channels pouring over polls, polls of polls and more polls - then the economic figures coming out this week are surely going to add a lot more ingredients to the boiling pot. read more...
20 April 2010
With the political debate heating up; more 'head to heads' scheduled and with the News Channels pouring over polls, polls of polls and more polls - then the economic figures coming out this week are surely going to add a lot more ingredients to the boiling pot. read more...
New White Paper highlights need for Energy Risk Management
Yesterday, npower launched its new white paper, commissioned from the London School of Economics on Energy Risk Management for UK business. The paper comes on the back of research that suggests that UK businesses now feel that energy presents a higher level of risk to their business than health and safety and security issues. But what should businesses be doing to manage the risks? read more...
11 November 2010
Yesterday, npower launched its new white paper, commissioned from the London School of Economics on Energy Risk Management for UK business. The paper comes on the back of research that suggests that UK businesses now feel that energy presents a higher level of risk to their business than health and safety and security issues. But what should businesses be doing to manage the risks? read more...
Night Night Power Market!
The market seems warm and cosy (aka stable with low volatility) - but wait until the players return in September! read more...
07 August 2009
The market seems warm and cosy (aka stable with low volatility) - but wait until the players return in September! read more...
An options strategy to suit.
Options are creaping into flexible contracts and this is a good thing as they can provide insurance, but in reality, often they appear to be given away, but look carefully and what you are giving away in return. read more...
31 October 2007
Options are creaping into flexible contracts and this is a good thing as they can provide insurance, but in reality, often they appear to be given away, but look carefully and what you are giving away in return. read more...
Summary of the week.
The market continues to baffle as players gear up for the winter read more...
28 September 2007
The market continues to baffle as players gear up for the winter read more...
What a volatile week!
Market moves for next week could be very interesting. read more...
21 September 2007
Market moves for next week could be very interesting. read more...
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