Energy/Electricity Hedging, Trading, and Commodity Markets
How to Use Energy Futures, Options, & Derivatives to Manage Risk and Structure Profitable Transactions.
Each Class is Limited to First 20 Registrants / A Two-Day Classroom Seminar (CPE Approved)
Brisbane (San Francisco), CA - August 1 & 2, Homewood Suites by Hilton San Francisco Airport-North
New York City, NY - November 14 & 15, Venue to be announced soon.
This proven program is for energy and electric power professionals who are looking for a comprehensive and clearly explained understanding of natural gas, oil and electricity financial instruments, the markets they trade in, and how these powerful tools can be used to manage risk and structure profitable transactions. Click here to register.
What You Will Learn
- 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.
You Will Also Learn
- What The Master Energy Trading Equation is, and why trading energy and electricity is different from the trading financial products 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.
- What the rationale, concepts and mechanics are for basis trading, spread trading, trading around assets and structured transactions.
- The fundamentals of energy and electricity options, the implications of high energy price volatility, and why merchant energy and electric power assets are valuable Call options.
- How to hedge energy and electricity price risk with CME-NYMEX options contracts, cash settled OTC options and physical peaking options; and how to create price caps, price floors and "no cost" collars.
- How to calculate annualized volatility, the fundamentals of pricing options and why the Black and Black-Scholes models need to be modified to price energy and electricity options.
- The put-call option parity equation, synthetic option positions and how to delta hedge.
- What Tolling Deals, Asset Optionality, and the petroleum industry's "Carry Trade" are, and how they work.
- Why a merchant fossil fuel generating plant is a call option on the spot spark spread, and you will learn a simple rule that will optimize your daily decisions on whether to use or idle an electric generator, storage facility or transportation asset.
- How heat-rate-linked power transactions can effectively convert natural gas futures, options, and swaps into electric power financial instruments which can then be used to manage electricity risks or structure profitable transactions (optional additional class material offered at 4:30 pm on Day 1).
- 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.
- 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 a merchant fossil fuel generating plant is a call option on the spot spark spread.
- A simple rule that will optimize your daily decisions on whether to use or idle a merchant electric generator, storage facility or transportation asset.
- 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.
- SNACK AT 11:30 will be provided (no lunch).
- 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 valuable to know them.
Your Instructor - Brisbane (San Francisco), New York City
John Adamiak is President and Founder of PGS Energy Training and an expert in energy derivatives and electric power markets. Mr. Adamiak is a well-known and highly effective seminar presenter who has over 20 years experience in the natural gas and electric power industries. His background includes 15 years as a seminar instructor, 9 years of energy transaction experience, and 6 years of strategic planning and venture capital activities. John's academic background includes an M.B.A. degree from Carnegie Mellon University.
Who Should Attend this Seminar
Among those who will benefit from this seminar include energy and electric power executives; attorneys; government regulators; traders & trading support staff; marketing, sales, purchasing & risk management personnel; accountants & auditors; plant operators; engineers; and corporate planners. Types of companies that typically attend this program include energy producers and marketers; utilities; banks & financial houses; industrial companies; accounting, consulting & law firms; municipal utilities; government regulators and electric generators.
Prerequisites and Advance Preparation
This fundamental level group live seminar has no prerequisites. No advance preparation is required before the seminar.
Basic level. This fundamental course begins with basic material and then proceeds to the intermediate level.
Why choose PGS?
PGS seminars are known for their clear explanations and in-depth content. Register for a PGS class today, and join the over 10,000 energy professionals who have already attended one of PGS's proven programs. View Past Seminar Attendees
Hotel and Seminar Information
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 5:00 PM
on the first day. On the second day, the seminar will resume at 8:00 AM
and will finish at 12:30 PM
. The program includes continental breakfast, lunch and coffee breaks on the first day and a continental breakfast, snack and coffee breaks on the second day. Attendees also receive a professionally produced seminar manual that can serve as a valuable office reference. Dress is casual for all seminars.
August 1 & 2
Homewood Suites by Hilton San Francisco Airport-North
2000 Shoreline Court
Brisbane (San Francisco), CA 94005
A limited amount of sleeping rooms are being held as a courtesy block. King Suite at $239 plus taxes. Please call the hotel and ask for the PGS Energy Training courtesy block. Courtesy block ends June 21, 2019. Please book soon since there are a limited number of rooms.
November 14 & 15
Venue to be announced soon.
New York City, NY
Because of the diversity of hotels found in the area, PGS Energy Training will not be holding a block of sleeping rooms with one particular hotel. Should you need a list of local hotels in the area, please contact us at (440) 853-1038 and we can help you with your accommodations.
Registration Fee and Discounts
The price for this comprehensive
Early Bird Special: Register on or before Jul 12, 2019 and save an additional $100 per order!
Register soon to get Early Bird pricing. A limited number of Early Bird seats are available.
Payment and Cancellations
Payment is due prior to the start of the seminar by Visa, Master Card, American Express, Diners Club, or corporate check.
Seminar fees will be charged to your credit card at the time of registration unless other arrangements have been made.
Please make checks payable to "PGS Energy Training" 26 Teal Lane · Hilton Head Island, SC 29926.
Cancellations can be made up to five (5) business days prior to the start of the seminar for a full refund.
No refunds will be made thereafter, but a one year full seminar credit will be given toward future workshops upon receipt of $175 which will used to help offset the non-refundable food, beverage, manual and other expenses incurred by PGS.
This one year seminar credit is good for any PGS Energy Training program except for seminars offered by PGS affiliate organizations.
Colleague substitutions may be made at any time.
If PGS needs to cancel a seminar due to instructor unavailability, lack of attendance or other unforeseen reason, you will be offered the choice of rescheduling for another seminar, a seminar credit, or a refund.
For more information on PGS policies regarding administrative matters and complaint resolution, please contact our offices at (440) 853-1038.
CPE Credits in Specialized Knowledge
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.
PGS Energy Training is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors.
State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.
Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.
CPAs interested in attending any seminars should contact our offices for details on CPE credits granted and any prerequisite requirements.
PGS Energy Training is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits.
PGS Energy Training has determined that attending Energy/Electricity Hedging, Trading, and Commodity Markets qualifies for 13.5 GARP CPD credit hours.
If you are a Certified FRM or ERP, please record this activity in your Credit Tracker at http://www.garp.org/cpd.
The Global Association of Risk Professionals (GARP) is a not-for-profit membership association dedicated to preparing professionals and organizations for making better-informed risk decisions. GARP’s membership represents more than 150,000 risk management practitioners and researchers at academic institutions, banks, corporations, government agencies, and investment management firms in 195 countries and territories. GARP administers the Financial Risk Manager (FRM) and Energy Risk Professional (ERP) Exams – certifications recognized by risk professionals worldwide. Visit www.garp.org/cpe.