Heat rate buying
If you wanted to buy a heat rate, what are some things that you would want to look for. Just undervalued heat rates that you think could increase exponentially?
Trending Content
| +39 | Breakdown of Commodity Trading Houses | 8 | 2s | |
| +22 | Best macro desks | 7 | 2d | |
| +17 | Delta One Trading | 8 | 1d | |
| +16 | How Quantitative is Commodity Trading | 7 | 3s | |
| +13 | Lateraling from Trading to IB vs. IB to Trading | 4 | 6d | |
| +12 | Working in Switzerland for Non EU | 1 | 2d | |
| +11 | 35% Pay Cut - S&T Exit Opportunity? | 1 | 1d | |
| +11 | Loser on the trading floor - help please! | 3 | 6d | |
| +10 | Commodities tradehouse vs FX market making | 2 | 1d | |
| +9 | Commodity becoming more mainstream and impact of derrivatives | 2 | 1d |
Career Resources
Cool stuff you're doing as a student, hope you get some answers.
Hard to say, if believe you are an actual “student”, but ehh I will bite a bit.
1) How do you know Tetco-M3 is a suitable market?
2) If Tetco-M3 is suitable, where is this plant actually located? Why not just check wikipedia and see the actual HR the plant needs to run.
3) After 2, why not seek if that city/state has more gas/elec driven heating/cooling. Now let’s see which month has most extreme temperatures.
4) Look up eia api; Wholesale Electricity and Natural Gas Market Data
Impressive if you’re actually learning about sparks as a student. Curious what school/program if don’t mind mentioning?
Were you given a power plant to manage the exposure around or you’re just trying to think up a trade idea or what exactly are you presenting? You wouldn’t really care about trading a spark unless you were dealing with an underlying generation exposure. Not really a “trade idea” you’d put on on its own if that makes sense yeah? More so something you’d have to take into account when trying to determine the hedge ratio of power/gas contracts to sell against to manage the exposure and also calc your breakeven fuel cost of the plant. (I.e is it profitable to run or not)
If you weren’t actually given a plant with a corresponding HR you could just trade a market Heat Rate (I.e power/gas spread) which seems like what you’re wanting to do irrespective of having an actual generation exposure.
If you’re looking at PJMW in general M3 would be most correlated basis market on gas side. If your plant is located further west in PJM something like M2 or DOMSP could also work.
Calc out HR/sparks historically and look at what periods they typically spike/are typically highest is there an overall trend etc. When is this and why do you think?
.
Ah, that's pretty cool. Wish I had classes like that and was learning about sparks and heat rates as a student.
A lot of WSO posts confuse me a little bit, but what on gods green earth are you fellas talking about?
lol this should help:
https://www.eia.gov/todayinenergy/detail.php?id=9911
https://www.investopedia.com/terms/s/sparkspread.asp#:~:text=The%20spar….
Generally not something you stumble upon unless you're in the industry.
OP edited his post for some reason, that's why it's confusing
If you want to go long outputs vs inputs (power vs gas, for example for a power plant... or products vs crude for a refinery), you want to look for situations where the demand of the output disconnects from the capacity to process the input. Ie is there a constraint where there is too much power demanded (hot weather) relative to what power plants can supply (low wind). Is there a refinery shut down that creates a crunch on a price insensitive product. This is a common principle across commodities.
Are we sure you are not the OP's TA? This is the correct logic and typically we build basic (or complicated) linear programming models to look at these valuations. Truly still not sure what OP's goal is though.
I thought the same thing. The original post was hard to decipher what he was even asking.
Not sure if OP is even a real person at this point and this thread is starting to confuse me more since he edited his post…? If he is actually real it honestly seems like he was learning about different energy spreads and just threw as many terms as he could think of together that dealt with power/gas spreads without actually knowing what they are or what he even wanted to do.
Eum et dolor in enim. Veniam cum voluptatibus perspiciatis nihil et modi. Perspiciatis qui animi animi explicabo et occaecati. Possimus et quisquam cum praesentium quo. Porro et amet aut adipisci illo ducimus. Magni molestias ab nam a dolor dolorum cumque.
Cum rerum id illum dolor. Et dicta aspernatur eum natus. Sit sapiente nisi amet. Culpa dolor impedit est fugit incidunt molestiae nulla.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...