Power trading strategies

Mr.Kurtz's picture
Rank: Chimp | 13

Hi all, I've started recently as a power trader and was wondering if you could recommend some resources (or write any comments) on various trading strategies possible in the electricity market.
I tried searching on the forum here and there are few people with experience in energy trading, so hopefully I'll get some answers (I found several discussions on power, but nothing detailed, except some info on DA vs RT and FTRs).

Coming from the "traditional" financial markets background, where there are multiple bible-sized books available on every detail, I was quite surprised to not find much on power.
I am familiar with the fundamentals of the business after rotating through the asset operations teams, but I am looking more for some inspiration on developing speculative trading strategies.

For example, what are the major players doing? Directional bets on fundamentals, i.e. weather / capacity outages? Is that then only matter of having better forecasting models than other players?
Spreads? Options? Physical / financial transmission rights? Or some more complex stat arb? And what about quant trading firms? I have head only of DC Energy and their FTRs trading, but not much else.
It would be great to get some overview of what is possible, or on the other hand, what is not worth wasting time looking at as it has been found to not be worthwhile.

Any helpful answers would be appreciated. Thanks

So far I've read only Energy Trading and Investing book by Edwards (good overview, but quite basic) and just ordered The Handbook of Energy Trading by Fiorenzani. Then some of the usual trainings by exchanges / ISOs etc. and some academic papers

Comments (12)

Dec 27, 2017

Are you a real time trader? Analyst? Ftrs? Term? What ISOs. Asset backed or mostly spec ?

Dec 27, 2017

I am a trader in the physical power team, so basically short-term, we do everything from front month through weeks and day-ahead down to real time.

Based in EU, so European markets (mainly Germany), and both asset backed and prop trading (handling the volumes for the assets in the group, but mostly focusing on prop trading).

Jan 2, 2018

It is hard to name a successful strategy with knowing of the concrete conditions of trading. Actually, it's even difficult to name in a particular situation and what i can give you is how to predict stock. Take note that by learning this idea of where the stock market is headed, this will greatly affect your chances making the right positions.

Jan 2, 2018

A swap doesn't mean you are swapping electricity for something else. It means you are either paying fixed prices or receiving fixed prices for electricity. Paying fixed means you make money if prices rise and receiving fixed means you make money if electricity falls (because you are paying floating).

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Jan 2, 2018

you can also swap hubs..... we do this a lot

Jan 2, 2018

you mean like, i will receive one hub's electricity price and pay another hub's electricity price? which hubs do you swap usually?

Jan 2, 2018

yes..... you can do any... fin miso/pjm... phy ent/fl.... endless

May 28, 2018

Here are some ways to trade rather than outright fixed price directional
* Relative value trades (sell premium basis buy discount basis)
* multi commodity options (power/gas, power/gas and oil
* consider selling look back RT and buying DA dailies etc

May 29, 2018

With the risk of being off topic, anybody got repositories of these "Bibles"? Perhaps including one on power to satisfy OP's question?

May 31, 2018

naked short jul-aug 18 ercot north

Feb 6, 2020