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Trading in Energy Derivatives Markets and Price Risk Management 07 - 10 July 2009, London, UK
Trading in Energy Derivatives Markets and Price Risk Management
7-10 July, 2009, London, UK
This four-day seminar is designed to provide oil industry professionals with a high level understanding of financial markets, fundamentals of trading and risk management. It is a well balanced mix of detailed presentations, practical case studies and interactive trading and risk management simulation software. It is a truly in-depth trading workshop designed to demystify commodities derivatives markets and financial instruments. This course is designed for both novices and seasoned industry professionals. The main topics of discussion include financial derivatives pricing, exposure and risk measurement, key trading strategies and practical application of derivatives to physical trading for risk management purposes. The course will be conducted in an informal setting and each newly introduced theoretical concept will be supported by hands-on exercises and trading simulation games.
This course will be supported by commodities trading and risk management interactive software TradeCruiser© which is specifically designed to apply previously introduced trading concepts in practice.
The main coverage topics include:
In addition, there will be complimentary presentations of topics that are often overlooked (but just as important) such as risk management tax and legal framework, exposure management, mid and back office functions as well as principles of control. This seminar will also touch upon such popular topics as financial structured products, real options and deal valuation and structuring.
PROGRAMME
DAY I: 7 JULY, TUESDAYFUNDAMENTALS OF PHYSICAL AND DERIVATIVES TRADING
9:30–11:30
11:30–11:45 Coffee Break
11:45–13:00 Trading Game 1: ‘TradeCruiser Flat Price Trading’
13:00–14:00 Lunch
14:00–14:15 Game review
14:15–15:00
15:00–16:00 Trading Game 2: ‘TradeCruiser Crack Spread Trading’
16:00–16:15 Coffee Break
16:15–16:30 Game review
16:30–17:00
17:00–18:00 Trading Game 3: ‘TradeCruiser Calendar Spread Trading Game’
DAY II: 8 JULY, WEDNESDAY
Options Trading Fundamentals
9:30–9:45 Game review
9:30 – 11.30
11.30 – 11.45 Coffee Break
11:45 – 13.00 Options Trading Strategies
13.00 – 14.00 Lunch
14.00 – 15.00 Trading Game 4: ‘TradeCruiser Options Trading’
15:00 – 16.00
16.00 – 16.15 Coffee Break
16.15 – 17.30 Trading Game 5: ‘TradeCruiser Delta Hedging’
DAY III: 9 JULY, THURSDAY
RISK MANAGEMENT FUNDAMENTALS
9:30–11:00
11:00–11:15 Coffee Break
11:15–13:00
13:00–14:00 Lunch
14:00–15:00 Trading Game 6: ‘TradeCruiser Storage and Arbitrage’
15:00–15:15 Game review
15:15–16:30
16:30–16:45 Coffee Break
16:45–17:45 Trading Game 7: ‘TradeCruiser Risk Management’
17:45–18:00 Game review
DAY IV: 10 JULY, FRIDAY
WHAT LIES BENEATH (NON-GLAMOROUS SIDE OF RISK MANAGEMENT)
9:30–11:00 Structured Transactions
11:00–11:15 Coffee Break
11:15–13:00
13:00–14:00 Lunch
14:00–15:30
15:30–15:45 Coffee Break
15:45–16:45 Trading Game 8: ‘Back Office’
16:45–17:00 Game review
PARTICIPATION FEES AND CONDITIONS:
2250 GBP for trading and oil&gas companies representatives, it includes:
2650 GBP for banks, investment and financial companies representatives, it includes:
Glossary
Risk management is a way to modify and control the risk profile of a firm’s cash flows.This allows Management to adjust their exposure to specific risks, depending on their appetite for those risks.
Oil trading – a trade of oil and oil products.
Hedge - the reduction of risk by covering anticipated commitments at a fixed price in the future through a futures or options contract. Buyers and sellers can hedge.
Derivatives – financial instruments that reflect value of an underlying commodity in the future.
Speculator- is frequent in & out of the Market looking for potential gain opportunities; Want price volatility to increase; Will enter into deals and set limits when to exit…
Hedger - is in & out of the Market only when there is a (strategic) business; Reduce/eliminate the risk faced from potential future price movements; Reduce/eliminate exposure to volatility of the business; Want certainty at the cost of sacrificing away potential upside;
Arbitrageur - takes offsetting positions in two or more instruments/markets to lock in profit; Exploit inefficiency in different markets/locations; Take advantage of mis-pricing of certain financial instruments; “Riskless” profit (from a price perspective)
Position: LONG – is to net own a commodity in a Market. A Long position is taken in the expectation that prices will rise. Think of something you own e.g. Your house. You are Long one house and would prefer its value to increase.
Position: SHORT – is to net owe a commodity in a Market. You have an obligation to supply a commodity not currently owned to someone else. A Short position is taken in the expectation that prices will fall.
Spot Price – is the spot price is the price for immediate payment and delivery
Forward Price – is the forward price is established by a contract in which you set the price now, but delivery and payment occur at a future date
Forward Curve – is a graph of forward prices over different forward time periods
Bid Price - is the price at which you can sell
Offer Price – is the price at which you can buy
Bid-Offer Spread – is the difference between the selling price and the purchase price
Liquidity – is the ease with which something can be bought or sold (converted to cash) in the marketplace; A large number of buyers and sellers and a high volume of trading activity are important components of liquidity; Depth, or the ability of the market to absorb either a large buy or a large sell order without a significant price change in a security, is also crucial to the liquidity of the market
Bullish Market Direction- is having the belief that prices will rise. A ‘Bull’ is someone who thinks market prices are going up.
A ‘Bull Market’ is when the price is rising.
Bearish Market Direction – is having the belief that prices will fall. A ‘Bear’ is someone who thinks market prices are going down.
A ‘Bear Market’ is when the price is falling.
CONTANGO – is the prompt price is less than the sustainable long term price of oil in the future
BACKWARDATION – is the prompt price is greater than the sustainable long term price of oil in the future
Spread – “…is trading the same commodity in two markets…”
Crack – “…is trading across the CDU, i.e. buying crude or a refined product and selling another refined product”
Flat Price Trading – “…is trading the outright commodity, as opposed to trading spreads or cracks…”
Arbitrage - “...is taking advantage of differing commodity prices for the same commodity in different markets...”
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