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.
A new product has been seen in the market. If we assume that the market is at £36/MWh for Summer 07, it allows a buyer to buy at £36 if the market settles anywhere between £36 and £41 if the market settles above £41 then the buyer pays the settled plus less £5 (i.e the spread between £36 and £41) the privilege of doing this means that the buyer will also agree that if the price settles below £30 they will pay £30. You pay nothing for this strategy up front.
This stratgey looks quite enticing. If one believes that the market is highly unlikely to fall and that it will job around the current market price. In reality though there is no risk management in this options strategy, if the price rises inexorably you are not hedged you have a £6 advantage but that is all.
Always use options if you know what you are doing and if it suits your strategy, if it increases risks then it is not necessarily the right thing for you as hedger.
08 June 2006
Summers show a bit of backwardation and contango but some of the long dated power looks cheap and prices in a load of unknowns which could go either way. read more...
21 April 2006
Metals markets go mad, nice to see that it isn't just the gas and power markets which respond to fundamentals. read more...
19 April 2006
As market become more ordered and stable VaR limits widen to allow traders to take more risk, this is fine as many models model history. In financial markets the biggest vol shift was 9/11 and in a few months this event will no longer be modelled in the financial markets an so risk limits will widen. read more...
14 February 2006
February History has shown that if ever the bears are at their most aggressive then it is now. Fundamentals also suggest that this year looks likely to be less volatile than last year. The very nature, of traders developing experience and not being panicking into trading lowers volatility. read more...
04 July 2005
British Energy share options worth gold dust as power prices go supersonic. read more...
Powerisk Receives-Independent Energy Consultant Commendation
At the recent Energy ‘Buying and Supplying’ Excellence Awards, Powerisk received a Commendation in the Independent Energy Consultant of the Year category. The awards, held at The Langham Hotel in London, were designed to showcase and recognise the very best practises in the energy supply and procurement arena with consideration given to all those involved in the process. read more...
29 November 2010
At the recent Energy ‘Buying and Supplying’ Excellence Awards, Powerisk received a Commendation in the Independent Energy Consultant of the Year category. The awards, held at The Langham Hotel in London, were designed to showcase and recognise the very best practises in the energy supply and procurement arena with consideration given to all those involved in the process. 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...
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...
Why is the Dollar Important?
With LNG now having a place in the UK gas market, the dollar will influence our energy prices. read more...
25 September 2009
With LNG now having a place in the UK gas market, the dollar will influence our energy prices. read more...
Recent oil price rises will not last
The recent oil price increase seen last week has already started to fall and Powerisk explains why it will continue to stall. read more...
25 March 2009
The recent oil price increase seen last week has already started to fall and Powerisk explains why it will continue to stall. 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...
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...
Forecast vs Forward Curve
The future business conundrum on abatment projects solved here. read more...
16 August 2007
The future business conundrum on abatment projects solved here. read more...
Keep up to date on energy trading news.
Click here to subscribe
Click here to subscribe
Powerisk Online tools and services.
Click here to login
Click here to login
Powerisk glossary of power terminology.
Click here for glossary
Click here for glossary
