Detailed Glossary

A Detailed Glossary of Energy Trading terms for registered users

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Nick Henfrey


P&L atttribution

by Nick Henfrey - Thursday, 6 November 2014, 7:29 AM

Let's say we added up the P&L of all our trades today, and then did the same tomorrow - the two values would probably be different - but why?

Some reasons:

  • We booked some new trades
  • The forward curve price changed
  • The FX rate we use to give reporting currency P&L changed
  • The discounting factor changed
  • Some trades were amended

P&L attribution calculates the change in P&L for each of the above individually - and any other factors - so that the effect of each cause may be understood


The exact calculation is rather complex, for example if we want to know the effect of new trades, do we value them against yesterday's curve price or today's? If we use today's then in effect we have partially attributed some P&L change to the new curve price

In general the P&L of each trade, or a netted exposure across a portfolio is is recalculated individually for each change that might affect the p&l (forward curve, fx rates etc), keeping each other effect constant

Because each change is taken in isolation the the sum of all P&L attribution detail does not add up to the overall change in P&L...

P&L attribution is often called P&L explained or P&L explainer



by Nick Henfrey - Thursday, 5 April 2012, 2:35 PM

A party is an organization, or part of an organization, which is legally involved in a trade


Every trade has at least two parties: a buyer and a seller

Our organization, or part of organization, is referred to as the first party, the other organization, or part of an organization is the counterparty

There may be a broker who introduces the buyer and seller - the buyer and seller are not known to each other until the trade is executed 

If our organization executes a trade on an Exchange then the Exchange is the counterparty



by Nick Henfrey - Thursday, 5 April 2012, 2:33 PM

The attribute, or adjective, physical usually refers to trades and business process that results or involves in the physical delivery of energy or a commodity


A trade is physically settled when it will result in the delivery of an energy or commodity. This is in contrast to a trade that is financially or cash settled

Physical business process involves the activities around

Scheduling delivery of electricity and gas (Operations)

Logistics of moving and delivering other commodities by ship, barge, train, plane, truck etc. including loading and unloading and inspections



by Nick Henfrey - Wednesday, 5 December 2012, 6:07 PM

A group of trades


Trading organizations group trades in order to simplify position management, risk reporting and settlement.

By grouping trades that have a common or complementary purpose, traders can focus on the performance of the portfolio as a whole, rather than the individual trades that make it up

Note the similarity to a trading book



by Nick Henfrey - Thursday, 16 January 2014, 5:42 PM

All physically settled derivatives imply either an obligation to deliver, or take delivery of, a commodity at a location at some time in the future

The obligation to deliver a commodity is called a short position of that commodity at that location and time in the future

The obligation to take delivery of a commodity is called a long position of that commodity at that location and time in the future


Traders sum the position of a set of trades to know their net position across that group of trades - usually called a portfolio, a book or a strategy. This is known as the traded, or trader, position

Traders take a long position if they believe the value of the commodity at the time of delivery will be greater than the contract, or strike, price

Traders take a short position if they believe the value of the commodity at the time of delivery will be less than the contract, or strike, price. Taking a short position is sometimes known as shorting

Each time a trade is executed the trader's net position changes. Most traders update their net position as each trade is executed 


Position Reporting

by Nick Henfrey - Monday, 13 April 2015, 5:52 PM

Traders make, and lose, money by taking positions, either short or long at various points in the future

Open positions in the future imply a risk that needs to be managed very carefully as changes in the forward curves affect the value of the net open position

It is therefore critical that traders know their up to date position at all times

This is the purpose of Position Reporting by means of Position Reports




by Nick Henfrey - Tuesday, 3 April 2012, 4:36 PM

In Energy Trading terms Power is almost always synonymous with Electricity

In physics terms power is a measure of the rate of energy conversion per unit time


In SI terms energy is measured in Joules

One watt = one Joule per second

1 kilowatt (kW) = 1,000 joules per second

1 megawatt (MW) = 1,000 kW

1 gigawatt (GW) = 1,000 MW

1 terawatt (TW) = 1,000 TW

Since power is energy per unit time (energy divided by time) it follows that energy is power multiplied by time

Frequently energy is measured in these terms:

1 kWh = 1 kilowatt for an hour = 3,600 * 1,000 joules = 3,600,000 joules



by Nick Henfrey - Wednesday, 10 September 2014, 7:26 AM

In Energy trading a Product is a standardized type of trade which may be offered by an Exchange, quoted by a Broker, or be the subject of a published Index


Note the similarity to an Instrument

A typical product has dimensional attributes of:



by Nick Henfrey - Tuesday, 28 October 2014, 5:45 PM

A term generally used in gas and power trading for trades that deliver in the near future


The exact definition is not fixed

Some trading platforms define prompt as completing delivery within a week of the trade date, others within the same month as the trade date


Quark spread

by Nick Henfrey - Monday, 8 June 2015, 5:28 PM

Spread between the price of nuclear fuel and power


It's fashionable to find a word ending 'ark for fuel to power spreads...

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