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Terminal | ||
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Usually used in the context of Natural Gas - an entry or exit point into a regional gas network or National Transmission System Detail In the UK natural gas is mostly extracted from gas fields in the North and Irish Seas and pumped through an offshore network of pipelines to a series of Terminals At the Terminals the gas is metered and then enters the National Transmission System LNG may be discharged from LNG vessels in an LNG plant, and then regasified into a Terminal located in or close to the port Interconnectors connect to Terminals at both ends, allowing gas to be flowed out of, and into, the NTS The UK Terminals are mostly located on or near to the coastline, and are therefore sometimes collectively referred to as the "Beach", or individually as Beach Terminals | ||
Theta | ||
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The value of options varies with time, in general the uncertainty in the price of the underlier reduces as the moment of exercise approaches. Theta is the measure of how much the value of a trade, or set of trades, varies with time Detail Theta is one of the Greeks that measure sensitivity of the value of a trade or portfolio to the passage of time Like most Greeks, except Delta, it is zero for linear trades (trades with no optionality)
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Tolling Agreement | ||
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A general term used to describe an agreement in which one party (the toller) provides an input product to the other party, and the other party provides another product (usually derived from the input product) in return Detail In the energy sector tolling agreements may cover:
In effect a tolling agreement is a physically implemented spread | ||
Trade | ||
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A trade is a legally binding contract between two parties A physically settled trade requires one party to deliver one or more commodities to the other party at a time and location specified in the trade terms, in return for one or more cash payments A financially settled trade requires both parties to agree the value of one or more underliers, and make one or more cash payments dependent on those values In general, trades have the following dimensional attributes Delivery period Trades also have the following non-dimensional attributes Price See also Execution | ||
Trading at Settlement | ||
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A type of Futures contract that is physically delivered and settled at the exchange closing price of the contract Detail Traders make bids on an Exchange for a TAS contract, specifying volume and price offset, the Exchange matches bids and offers in the usual way For example a trader may bid to buy 1,000 barrels of crude oil at the settlement price minus 3 cents, if another trader offers to sell that volume at that price then the exchange matches the orders and a TAS futures contract is executed at the settlement price less 3 cents A TAS futures contract is similar to an indexed forward TAS contracts are frequently used in oil futures | ||
Underlier | ||
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Something physical or tangible that may be referenced by a contract or trade Detail Financial derivatives are completely cash-based and usually have no physical underliers Energy derivatives usually have at least one physical underlier, which may be a commodity, e.g. coal or a something related to a commodity e.g. storage The underlier acts as a bridge to the physical world - and usually as a set of reference prices for price-setting and valuation We need to emphasize that nearly all energy trades have at least one physical underlier - few of them actually involve the delivery of energy commodities
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Upstream | ||
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A term principally used in oil and gas context - covering the search for new reserves, exploratory activities, construction of new extraction facilities, and the running of those facilities Detail The gas and oil industries are generally divided into three main sectors - roughly following the life cycle of the commodity Upstream activities follow a sequence:
See also midstream and downstream | ||
Virtual | ||
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Something that behaves like something else but is not really that thing Detail We've all heard of virtual reality - it appears (or tries to appear) real but is not, but it does have many of the characteristics of real So what does that mean for us? Well let's take a real(!) example Virtual Storage - Storage allows organizations to inject gas at one point in time and withdraw it later An organization (the seller) may sell another organization (the buyer) virtual storage the buyer of the product sells gas at no cost to the seller at some point later in time the buyer of the product requests the seller of the product to sell the gas back at no cost the seller tracks the level of virtual gas, and tracks this against the virtual capacity of the storage product sold | ||
Volume | ||
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Volume is the measure of how much of something is involved in a trade Volume = Quantity (but the term Volume is nearly always used in preference) Hence in energy trading volume may have dimensions of energy, mass, weight or volume Detail Volume is one of the important attributes of a trade Volume may be specified: As a total for the entire trade By day, month or some other period for the duration of the trade Volume has units of quantity according to the commodity: Mass (often incorrectly called weight) - often used for coal, oil and other non-gaseous commodities e.g. metric tonne (T), kilogrammes (kg) Volume - sometimes used for gaseous and liquid commodities millions cubic feet (mcf), barrels (bbl), gallons Energy - may be used for any commodity e.g. therms, Megawatt hours (MWh) For gas and electricity trades it is generally more convenient to trade in quantities of energy Other energy commodities are usually measured in volumes of mass or volume since this is more practical to measure at delivery Volume traded will directly affect the traded position of that commodity Volume may be constant over the duration of the trade, or may vary over the different delivery periods: the delivery volumes are defined in the Schedule of the trade
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