IN-PERSON CLASSROOM SEMINARS

• How to use futures contracts, options, swaps, trigger deals, "The Master Energy Hedging Equation" and other techniques to create customized risk management solutions to protect your company from natural gas, oil and electricity price risk, basis & LMP risk, delivery risk and volumetric (intermittency) risk.
• How physical and cash settled futures contracts, over-the-counter energy swaps and physical forward contracts are traded and the purposes served by these markets.
• How the ICE and CME-NYMEX futures exchanges and electronic marketplaces function, and what the differences are between ICE OTC, ICE Futures, CME Globex, CME Clearport Services and The Nodal Exchange.
• How "cash margining" is done with a futures exchange, its cash management impact and the role of the Clearinghouse.
• What the differences are between a futures commission merchant ("FCM"), over-the-counter broker, trader, market-maker, power marketer and wholesale energy merchant.
• What basis risk is, and how basis, spread, LMP and delivery risks can blow up your energy and electricity hedges.
• Why Trigger Deals are so popular, and what the difference is between the financial and physical basis ("fin" and "phys").
• How to structure profitable energy, electric power, and petroleum transactions without exposure to price risk; and how to financially turn one commodity into another.
• How to make money by buying valuable energy options from your customers and suppliers, and how your company may be missing a significant financial opportunity.
• Why "extendible" deals can be profitable, and how energy trading floors "trade around assets."
• What the terms "Contango" and "Backwardation" mean.

• "Puts", "Calls", extrinsic value and other energy option terminology and concepts.
• The difference between exchange-traded, over-the-counter and physical energy/electricity options.
• What American, European and Asian style options are.
• Why one should rarely exercise an option before its expiration date.
• Mean reversion & price jumps--Why the Black and Black-Scholes option pricing models may not accurately price energy and electricity options.
• The services often used to price energy options.
• The methodology used to calculate "annualized volatility" for the energy markets.
• The important implications of high energy price volatility
• Why trading energy and electricity is different from the trading equities, bonds and other commodities.
• The many different types of energy and electricity trading.
• Why traders specialize, and the different ways energy traders can get an "edge" on the competition.
• How the many types of energy & electricity trading can be summarized by one simple three dimensional graph and "The Master Energy Trading Equation."
• Why many traders trade the 'basis" or price spreads, and how it works.
• Why merchant energy and electric power assets are valuable call options on spreads.
• What asset "optionality" means.
• What the terms "Contango" and "Backwardation" mean, and how the energy "carry trade" works.
• Why having ownership or contractual control of physical energy assets gives a significant advantage to a trading company.
• What "trading around assets" means
• Why merchant assets are call options on location, calendar, and product price spreads.
• A simple rule that will optimize your daily decisions on whether to use or idle a merchant electric generator, energy storage facility or transmission asset.
• Three detailed examples of how to trade around energy transmission, storage, and generating assets
• What a "tolling deal" is.
• What "structured transactions" are, and why they can be a "win/win" for all parties involved.
• How energy and power marketers make money by buying valuable energy options from their customers and suppliers, and how your company may be missing a significant financial opportunity.
• What "extendible" deals are, and why they are so profitable for energy marketing companies.
• How to create price caps, price floors and "no cost" collars with energy options.
• What the option "Greeks" are, and the basic concept of delta hedging.
• The basics of the valuable put-call option parity equation,.
• Four common "synthetic option" positions, and why it is worthwhile to know them.

DAY ONE

• Overview of the three different energy & electric power forward markets, terminology, the purposes served by these markets, price & spread hedgers and the basics of energy and electricity physical transactions.
• The differences between futures commission merchants ("FCM"), over-the-counter brokers, traders, market-makers, and energy/power marketers.
• The four different methods used to manage energy and electricity price, basis, spread, delivery, operational, and volumetric (intermittency) risks.
• The dangers of liquidity risk, and when it can blow up a company.
• What physically-settled energy futures contracts are; why only 1% of physical energy futures go to physical delivery and what the difference is between a physically-settled energy future contract and a physical forward contract.
• How the CME and ICE futures exchanges are structured and the role of the CME and Ice Clear Clearinghouses.
• How physically-settled and cash-settled energy futures contracts trade electronically on CME Globex and ICE Futures.
• The broker account maintenance, margin deposit, cash management and "funding risk" issues associated with clearing a financial or physical energy transaction through the CME, Ice Clear or Nodal Exchange Clearinghouses.
• LUNCH
• How buyers and sellers hedge natural gas, crude oil, heating oil and gasoline price risk with CME physically-settled futures contracts.
• The "political" risks of hedging and the factors that can weaken the effectiveness of a futures hedge.
• How "Active Hedging", "Dynamic Hedging" and "Hedgulation" can hurt your company's hedging program.
• What the difference is between the locational "basis" and a locational price spread.
• The five different ways the term "basis" is used in the energy markets.
• How the "Master Energy Hedging Equation" is defined, and what its implications are.
• What basis risk is, and how it can destroy your futures hedges.
• Two examples of natural gas "basis blowout" and how it relates to LMP spread risk in ISO electricity markets.
• The difference between a commodity swap, contract-for-differences ("CFD"), cash-settled futures contract and cash-settled swap futures contract.
• The definition and use of common energy/electricity cash-settled financial instruments including fixed-for-floating, penultimate, exchange-indexed, basis, index, swing, dart, outright swap and cash-settled futures products.
• How buyers and sellers use cash-settled futures contracts and swaps to hedge natural gas, oil and electricity price, basis, spread, and LMP risk.
• How buyers and sellers can use cash-settled financial instruments to turn natural gas into virtual oil or virtual electricity (And vice-versa); Day Ahead LMP into Real Time LMP (And vice-versa); An average of daily prices into a fixed or monthly index price; and many other forms of "slicing & dicing."
• An overview of how the "ICE OTC" energy & electricity trading platform works.
• What the differences are between ICE OTC, ICE Futures, CME Globex, CME Clearport Services CME Direct and The Nodal Exchange.
• Where to find the four different Master Sales & Purchase Agreement templates which contain the standard industry bilateral contract language for physical & financial natural gas and electric power transactions.
• How basis & spread swaps work; and how these swaps relate to cash-settled futures contracts.
• The difference between the financial and physical locational basis ("fin" and phys").
• What a "trigger deal" is, and why it is economically and politically efficient.
• Why so many energy industry buyers and sellers outsource the execution of their hedges and risk management solutions.
• How the "Master Energy Hedging Equation" is a simple and powerful way to quickly understand many different types of energy transactions and to quickly convert one form of transaction into another.
• How the "Master Energy Hedging Equation" underlies the structure of a firm's energy trading books.
• The basics of the "Value-at-Risk" ("VaR") calculation, and why to be careful.
• Additional Electricity Material ( Optional Session at 4:30 pm).
• How heat-rate-linked power transactions can convert natural gas futures, options, and swaps into electric power financial instruments which can then be used to hedge electricity risks or to structure profitable power deals.

DAY TWO

• "Puts", "Calls", extrinsic value and other energy option terminology and concepts.
• The difference between exchange-traded, over-the-counter and physical energy/electricity options.
• What American, European and Asian style options are.
• Why one should rarely exercise an option before its expiration date.
• Mean reversion & price jumps--Why the Black and Black-Scholes option pricing models may not accurately price energy and electricity options.
• The services often used to price energy options.
• The methodology used to calculate "annualized volatility" for the energy markets.
• The important implications of high energy price volatility
• Why trading energy and electricity is different from the trading equities, bonds and other commodities.
• The many different types of energy and electricity trading.
• Why traders specialize, and the different ways energy traders can get an "edge" on the competition.
• How the many types of energy & electricity trading can be summarized by one simple three dimensional graph and "The Master Energy Trading Equation."
• Why many traders trade the 'basis" or price spreads, and how it works.
• Why merchant energy and electric power assets are valuable call options on spreads.
• What asset "optionality" means.
• What the terms "Contango" and "Backwardation" mean, and how the energy "carry trade" works.
• Why having ownership or contractual control of physical energy assets gives a significant advantage to a trading company.
• What "trading around assets" means
• Why merchant assets are call options on location, calendar, and product price spreads.
• A simple rule that will optimize your daily decisions on whether to use or idle a merchant electric generator, energy storage facility or transmission asset.
• Three detailed examples of how to trade around energy transmission, storage, and generating assets
• What a "tolling deal" is.
• What "structured transactions" are, and why they can be a "win/win" for all parties involved.
• How energy and power marketers make money by buying valuable energy options from their customers and suppliers, and how your company may be missing a significant financial opportunity.
• What "extendible" deals are, and why they are so profitable for energy marketing companies.
• How to create price caps, price floors and "no cost" collars with energy options.
• What the option "Greeks" are, and the basic concept of delta hedging.
• The basics of the valuable put-call option parity equation,.
• Four common "synthetic option" positions, and why it is worthwhile to know them.

This two-day seminar will be held at the hotels listed below or can be conducted on-site at your facilities. The seminar will start promptly at 8:00 AM and will finish at 4:30 PM on the first day. On the second day, the seminar will resume at 8:00 AM and will finish at 3:00 PM . The program includes continental breakfast, lunch, and coffee breaks on the first day. On the second day a continental breakfast, snack or lunch and coffee breaks are included. Attendees also receive a professionally produced seminar manual that can serve as a valuable office reference. Dress is business casual for all seminars.

This live group seminar is eligible for 13.5 CPE credits. Be aware that state boards of accountancy have final authority on the acceptance of individual courses for CPE credit. As of January 1, 2002, sponsored learning activities are measured by program length, with one 50-minute period equal to one CPE credit. One-half CPE credit increments (equal to 25 minutes) are permitted after the first credit has been earned in a given learning activity. You may want to verify that the state board from which your participants will be receiving credit accept one-half credits.