Detailed Glossary

A Detailed Glossary of Energy Trading terms for registered users


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by Nick Henfrey - Wednesday, 10 September 2014, 7:17 AM

Origination - the negotiation and conclusion of bespoke contracts, and structuring of non-standard products to offer for sale


Origination teams and originators in energy trading organizations are about putting together large integrated contracts, outside standard master agreements. These might involve:

Structured long-term procurement deals particularly for oil and gas

Virtual Assets - Virtual storage, virtual power plants, virtual refining

Complex hedging products



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 - 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...



by Nick Henfrey - Wednesday, 15 January 2014, 7:32 AM

Shape is a term, mainly used in Power Trading to describe a non-continuous delivery over a delivery period

For example a UK power trade may have a delivery period of a month and have peak shape, which specifies that the power will be delivered over a time period of 07:00 - 23:00 each day of the Month


Typical shapes include

  • Peak - peak daytime hours
  • Offpeak - non-peak hours
  • Extended peak - longer hours than peak
  • Blocks - in the UK the day is divided into six four-hour blocks starting at 23:00, Various combinations of these blocks may be traded (note that peak is blocks 3-6)
  • Weekday - Weekdays that are not National Holidays
  • Weekend - non-weekdays
  • Combinations of weekday and weekend and one of the others (e.g. WD345 is blocks 3,4 and 5 on weekdays only)

Shape in Power delivery is usually referred to as Profile

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