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Energy and commodities Trading

kean

Mathematics Student
Folks,

Anyone can advise on energy and commodities trading? I know that UK Birbeck College does offer commodities program. Please advise if you know any other schools. Many thanks.

Best,
K
 

Andy Nguyen

Member
You should probably look at programs in Midwest or in Chicago. Chicago has the CBOT which trades all commodity. Corn/ethanol is popular. Lot of companies out there specialize in this market so if you to school there, chance are you will end up in one of many shops doing commodity.
Commodity has a good year this year despite the credit crisis. Look likes it will have many good years ahead.
 

Yuriy

MFE Alum
I wonder why would any school have a program specifically in commodities? :) It is my understanding that schools try to diversify their offerings so satisfy the needs of most people.
 

QuantNet

Administrator
Staff member
I can recommend two books on this. Both are easy reads.

Fundamentals of Trading Energy Futures and Options (Hardcover)
This one is really good and you can learn basics of options and futures without any prior knowledge.

Natural Gas & Electric Power in Nontechnical Language (Pennwell Nontechnical Series) (Hardcover)
This one is good if you can't get to sleep at night or if you really want to know the inner workings of energy production. It is not about trading, but it contains the background that traders need.

As far as school programs, I don't know any. I would imaging that some will offer specific classes in commodities, but not center the department around it (maybe in the mid-west or Texas though). I think if you get the general degree, you could learn how each segment uses it differently. Especially if you are an entry-mid level worker, you would probably be trained in those specifics on the job.
 

kean

Mathematics Student
Thank folks. I think they may just offer one or two subjects in commodities or energy trading then the rest may be similar to finance or financial mathematics.

I will check it out.
 

kean

Mathematics Student
agreed

I think Russia is 6th largest producer of crude oil at this stage (need to look at BP's report again).

You're right.

I personally think commodities and energy trading are more interesting.

The best place on earth to trade energy is Russia :) They make money out of nothing :)
 

Yuriy

MFE Alum
I think Russia is 6th largest producer of crude oil at this stage (need to look at BP's report again).

You're right.

I personally think commodities and energy trading are more interesting.


It is not just because of its high oil production but because you need to know the right people who know the right people who help you make an oil company your own :) without investing much in it :)
 

alain

Older and Wiser
I personally think commodities and energy trading are more interesting.

Energy trading is very volatile and it is not for the faint of heart. It sounds really good from the paper news but reality is much much different.

There is very few reasoning in trading oil so, you don't need an FE to do it. Oil depends a lot on Macroeconomic factors, politics and the OPEC. The latter two are so unpredictable that it really doesn't matter.
 

kean

Mathematics Student
prediction

I think anything to deal with people and financial markets are unpredictable.

Energy trading is very volatile and it is not for the faint of heart. It sounds really good from the paper news but reality is much much different.

There is very few reasoning in trading oil so, you don't need an FE to do it. Oil depends a lot on Macroeconomic factors, politics and the OPEC. The latter two are so unpredictable that it really doesn't matter.
 

alain

Older and Wiser
I think anything to deal with people and financial markets are unpredictable.
True but sometimes we are looking into patterns or tendencies of the market to apply reasoning. Oil doesn't lend itself for this type of analysis.
 

kean

Mathematics Student
agreed

One of my econ professor used to tell me that modeling oil price is insane.

Stock prices can be viewed from the stochastic movements. It is easier to tackle from the behavioural finance point of view.

I agreed with you.


True but sometimes we are looking into patterns or tendencies of the market to apply reasoning. Oil doesn't lend itself for this type of analysis.
 

Christian

Well-Known Member
Speaking of energy trading.. does anybody have experience working at an energy company? I'm exploring career options and considering career options at a company like BP, Exelon, Statoil, Louis Dreyfus etc.

Can anyone offer insight as to the training, culture and career paths for these firms? Any help would be greatly appreciated :)
 

VladimirBunicu

Active Member
Speaking of energy trading.. does anybody have experience working at an energy company?
Can anyone offer insight as to the training, culture and career paths for these firms? Any help would be greatly appreciated :)
Christian, e-mail me for the manuals and the info on virtual seminars and training by one of major market and electric power providers on East coast.
Natural Gas & Electric Power in Nontechnical Language (Pennwell Nontechnical Series) (Hardcover)
This one is good if you can't get to sleep at night or if you really want to know the inner workings of energy production. It is not about trading, but it contains the background that traders need.
In order to trade electricity one must know the inner workings! I would check out this book that Woody recommended. One of the branches at the company I work at trades electricity futures on day- and week-ahead markets. My exposure to the strategy is minimal - I had to evaluate the initial margin for them, and with that I still have learned something of interest. :-k There is a certain descriptive similarity with managing an equities/fx portfolio. First, you will need to think in terms of MWH's rather than $'s ;) This market is extremely volatile, from what I know. The major difference that I see, one's portfolio consists of different locational zones rather than different equity/bonds/fx. The prices for electricity change for each zone, but eventually they are dictated by energy produced and consumed in the whole system (+transportation costs); the explanation lies in the nature of electricity (you practically can't store it) and by an application of Graph Theory (again, e-mail me for the link to materials, if interested). An interesting thing is, in certain zones in certain times the prices can be negative, because the flow can be in reverse direction (to producer from consumer for a certain time period and, again, because you can't store it, the quantity produced in one zone must be either transfered to another zone, or consumed on place). Hm... negative price would be a weird phenomenon for stock market ;)
 

Yuriy

MFE Alum
An interesting thing is, in certain zones in certain times the prices can be negative, because the flow can be in reverse direction (to producer from consumer for a certain time period and, again, because you can't store it, the quantity produced in one zone must be either transfered to another zone, or consumed on place). Hm... negative price would be a weird phenomenon for stock market ;)

Very interesting :) I can understand negative prices, but "reverse direction flow"? :D I haven't heard of this before, and nothing like this was mentioned in my undergrad Physics course :)
 

kean

Mathematics Student
Manual

Christian, what manual do you have? Can you email across if it is related to energy trading? Thanks.

Speaking of energy trading.. does anybody have experience working at an energy company? I'm exploring career options and considering career options at a company like BP, Exelon, Statoil, Louis Dreyfus etc.

Can anyone offer insight as to the training, culture and career paths for these firms? Any help would be greatly appreciated :)
 

Christian

Well-Known Member
Kean,
I think you're confused. You need to get the manual from Vladmir. Unless you were asking how I found these different companies.. the answer to that is open ears and reading the energy news!
 

alain

Older and Wiser
Christian, e-mail me for the manuals and the info on virtual seminars and training by one of major market and electric power providers on East coast.

In order to trade electricity one must know the inner workings! I would check out this book that Woody recommended. One of the branches at the company I work at trades electricity futures on day- and week-ahead markets. My exposure to the strategy is minimal - I had to evaluate the initial margin for them, and with that I still have learned something of interest. :-k There is a certain descriptive similarity with managing an equities/fx portfolio. First, you will need to think in terms of MWH's rather than $'s ;) This market is extremely volatile, from what I know. The major difference that I see, one's portfolio consists of different locational zones rather than different equity/bonds/fx. The prices for electricity change for each zone, but eventually they are dictated by energy produced and consumed in the whole system (+transportation costs); the explanation lies in the nature of electricity (you practically can't store it) and by an application of Graph Theory (again, e-mail me for the link to materials, if interested). An interesting thing is, in certain zones in certain times the prices can be negative, because the flow can be in reverse direction (to producer from consumer for a certain time period and, again, because you can't store it, the quantity produced in one zone must be either transfered to another zone, or consumed on place). Hm... negative price would be a weird phenomenon for stock market ;)

Wow, this is really interesting. I majored in EE in College and, although I know about this types of derivatives, I never gave it too much thought.

Vladimir, it does make a lot of sense to me. Actually, I think what you say comes more naturally to me than the inner workings of the market for regular securities. I remember working and analyzing power distribution networks from a friend on my Dad's in college. It is graph theory to the purest. Also, you need to know plant capacities, and load distribution and balance. I don't know how the latter plays in a big grid with different companies juggling to deliver electricity to different markets. In Cuba there is only one electricity company (the state) and it is not as complicated to analyze.

One last poing, bringing up and down power plants is not a trivial task. IIRC, in the Enron movie the traders did something like that to manipulate the market.
 

kean

Mathematics Student
manual

Vladmir, do you mind to share that manual?:)

Christian, e-mail me for the manuals and the info on virtual seminars and training by one of major market and electric power providers on East coast.

In order to trade electricity one must know the inner workings! I would check out this book that Woody recommended. One of the branches at the company I work at trades electricity futures on day- and week-ahead markets. My exposure to the strategy is minimal - I had to evaluate the initial margin for them, and with that I still have learned something of interest. :-k There is a certain descriptive similarity with managing an equities/fx portfolio. First, you will need to think in terms of MWH's rather than $'s ;) This market is extremely volatile, from what I know. The major difference that I see, one's portfolio consists of different locational zones rather than different equity/bonds/fx. The prices for electricity change for each zone, but eventually they are dictated by energy produced and consumed in the whole system (+transportation costs); the explanation lies in the nature of electricity (you practically can't store it) and by an application of Graph Theory (again, e-mail me for the link to materials, if interested). An interesting thing is, in certain zones in certain times the prices can be negative, because the flow can be in reverse direction (to producer from consumer for a certain time period and, again, because you can't store it, the quantity produced in one zone must be either transfered to another zone, or consumed on place). Hm... negative price would be a weird phenomenon for stock market ;)
 
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