Q&A: I'm a real-time power trader

A little about myself, graduated 2 years ago from b-school in the northeast with a finance degree. Originally had planned to go the Asset Management route, passed CFA Level I etc, wound up in the power trading industry after a internship and got a full time gig shortly after. Ask away.

 

Strong username, plan on buying one soon ;) ?

Any advice for landing a power trading internship? Do you think having an engineering degree could help me land an internship in this field?

 

-haha maybe when they've depreciated enough

-as far as landing a internship, network your ass off, hit up alum, apply to every position that is relevant to power trading. look for load forecasting analyst positions, risk, commercial ops, anything to get your foot in the door really. one thing i would highly recommend is learning in great detail how power markets operate. you would make a damn good impression if you could tell me how LMP's work, how power physically flows on the grid, generation stack, how generation is dispatched, etc. all the ISO websites have great free training videos that go over this in great detail. (PJM MISO CAISO) it's embarrassing how many traders i've worked with don't know how power physically flows.

-i think an engineering degree would help a lot, the more quantitative your background is the better. every trader position i've seen requires a finance/economics/engineering background

 
Best Response
  1. scheduling is the best way to get into trading, but even those are hard to come by straight out of school. it is true that most want experience, you'll have to work your way up from BO/MO. once you have your foot in the door, even if it's not the position you want, it's all up to hard you want to work to become a trader.

  2. 5 week rotation

  3. mon-thursday 6pm-6am

  4. mon-wed 6am-6pm fri-sun 6pm-6am
  5. thurs-sunday 6am-6pm
  6. 7 days off
  7. mon-fri 9am-5pm (support week)

  8. that's a great question. i'm trading west power now, but i'm much more interested in trading east power, so i'm trying to move into roles that trade pjm miso nyiso neiso. it's a much more liquid and volatile market with way more opportunity than the west imo. i also want to move into trading financial products (ICE Cash/virtuals) some power markets in the US are not structured, so its the old OTC market. can be quite boring.

 

how do you deal with the change to your body clock? I'm find working a 12 hour day, but if it was 7-7 the other way I'd be fucked I would think. I would think you'd need copious amounts of adderall and melatonin (not simultaneously mind you) to get through this. curious as to how you maintain your health with this crazy schedule

 

How much math is involved? What's a typical type if problem, buy that you would do? Are you trading all futures contracts? Are you at a utility, bank, ferc, or what type of power-gas, electric, oil?

 

-depends what product you're trading, on the hourly desk nothing more than basic arithmetic. need to be fast and quick with numbers though. if you're trading FTRs and transmission products you might need strong math and programming skills.

-i'll often call my counterparties and see if there is cheap power i can purchase rather than generate myself. if my gen cost is $50 and there's a $40 market out there, ill buy as much as i can to bring my generator to the bottom. if it's a hot summer day and i dont have enough of my own generation, i'll have to purchase to cover my load. this is the Asset Management side of power trading. we can also speculate and import/export with ISOs.

-utilities/co-ops/munis/industral load.

-from a trading standpoint we dont care about what type of source it is, a MW of energy is a MW of energy. a pure commodity.

 

so..i dont have a STEM background but i work as a data analyst and am familiar with machine learning techniques, some SQL, python ,etc ....

Im not the kind of person who can sequence numbers or do long division in my head..so do i have a chance at all?

alpha currency trader wanna-be
 

This is a new area for me, so forgive my ignorance; - What are the high seasons and how do you prepare for it? - How do you make the time pass by when you're having a slow shift at night? - What is the average span of a traders career in that sector? 10 yrs, 35yrs?

CNBC sucks "This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up
 

-Pre rooftop solar, west power was not all that boring in real-time, not at all. Especially with the year mr. songs went down.

How is the dating life, do you find nurses with similar shift patterns? How you deal with all the time off and alone? Do you ever not wear pants on a slow day? One of my goals is to not wear pants one weekend at the office when I am on-call and forced to come into the office.

 

I work in the field and have some questions for you - What would you say would be good learning materials (books, etc) would be besides the ISO videos and slides - You say you trade in the west so how has the penetration of renewables effected your trading?
- How do you see the future of renewables effecting your trading (specifically the CAISO duck curve) - Do you recommend any industry conferences to attend (I know platts has a huge shindig in vegas but I was wondering if there was anything else you would recommend since alot of these are shit/just a place to throw around business cards

"Hold on to your butts" See all my other WSO posts here
 

-Energy Trading and Investing by Davis Edwards

-i personally dont manage any renewables units, but i trade with plenty of people who do. obviously subject to short term weather forecast deviations so it can be tricky trying to trade around it. renewables will inevitably play a larger role in the future and i think the grid will play more of a balancing act. any time you add generation and transmission lines to the grid, the topology of the system changes. renewables also can add considerable congestion to the grid.

here's one perspective http://www.businessinsider.com/green-energy-isnt-compatible-with-us-pow…

-nodal conference and bloomberg holds energy events, ISO's as well.

 
  1. How's the compensation?

  2. Career Path/Exit Options?

  3. Are utilities a good place to start out at? I've been interested in the past and I have contacts on the trading desk of a large utility here on the west coast.

The last act is tragic, however happy all the rest of the play is; at the last a little earth is thrown upon our head, and that is the end for ever.
 
  1. differs largely from shop to shop but they all pay well. look it up on glassdoor

  2. many options, you can be a consultant, quantitative analyst, origination, sales for market data software, endless. i personally want to stay in trading, love the fast-paced environment, developing strategies, and most importantly the intensive research

keep in mind "Real-Time" itself is such a vague term. you can trade on the hourly desk doing shift work, you can trade real-time financial cash on ICE, options, you can trade financial products like virtuals and up-to that is essentially a combination of trading in the day-ahead and spot market and arbitrages the spread to converge prices, resulting in a more efficient market

  1. utilities are a great place to start out. while everyone would like to trade power for a BB cause working on wall street sounds sexy, it's extremely hard. i was talking to a bank trader (GS MS JP) and he said the second there's an opening on the desk, there's a hundred internal applicants before it even goes out to the public. leverage the hell out of those connections, anything to get your foot in the door.
 

How much do you think an oil trading background would help with power? I'm guessing the risk management will be quite a bit different due to the big intraday price changes in power.

Also, what kind of compensation packages would come with analyst/scheduler/risk/trader roles? I'm sure all are pretty variable, but would appreciate a swag at the numbers.

 

-i think it would help immensely, what interests you in going from oil to power? you are correct on that, risk management and the volatility of the markets is completely different due to the instantaneous production and consumption of energy, and the fact that power cannot be stored.

name me a commodity that can go from $80 to $2000 in one hour. generators are large man-made machines that will (and often do) trip. on a hot summer day when your supply is cut short like that... good luck.

 

Without having worked in power before, it has mostly just been the parallels that I can see from the outside and a general interest in the commodity markets (moreso than equities). I'm currently in the process of getting an MBA in Ann Arbor and it seems to me that working for someone like DTE or Consumer's Energy would be about the only way that I would stay in this area.

 

I'm currently working as a "real-time trader" but my desk doesn't trade bilaterally. What should I focus on that would better prepare me for a desk that does?

Also, could you elaborate more on your research process? What are you primarily looking at? Market rules? Historical RT prices?

What tools do you use on a day-to-day basis? YES Energy? IIR? Genscape?

 

For someone who is interning in BO/MO do you think it is worth sticking around to eventually get into a FO trading role? I mean if your with a big 6 OG firm it can take 4-5 years before you get that opportunity (depending on your performance of course).

 

I'm looking at making a transition into energy trading. I currently work for an electric company, I've obtained a MSc in Energy Management, and I have made good connections with that side of the company. Two questions. 1. Can you help me understand what it means to work in "Origination"? 2. Have you seen people enter directly into Day-Ahead trading, skipping over real time trading? Reason for asking, I'm not afraid of hard work and weird hours but I have two boys and I coach their sports teams, therefor I have to have a fixed schedule.
Any info will be much appreciated.

 

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