Detailed Glossary

A Detailed Glossary of Energy Trading terms for registered users

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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 - Thursday, 27 February 2014, 7:24 AM

The p&l of trades (and cash flows) is described as:


Most trades involve delivery at some point in the future

Because the value of the commodity to be delivered is not known before the delivery, the value needs to be estimated or calculated from market data.

For forwards and futures and other linear trade types the value may be estimated by a simple mark to market calculation

For options and other non-linear trades the value may be calculated using the Black 76 method (derived from the earlier Black-Scholes method)

We say the trade's value (its p&l) is unrealized because it is not yet known for certain, and is therefore a cause of market risk

Once delivery has taken place, we know (or don't care about) the delivered value, the value of he trade is known and no longer varies. In effect the p&l is locked in, there is no more market risk associated with this trade and the p&l is said to be realized

The p&l of a trade (or cash flow) moves from unrealized to realized when one or more of the following conditions has been met

  • Delivery has taken place
  • Payment has taken place
  • Some time after one of the previous conditions

Realization is the set of business rules that defines when p&l moves from unrealized to realized based on:

Realization is subjective: different organizations may have different business rules to determine realization




by Nick Henfrey - Monday, 13 April 2015, 5:58 PM

Often used as a term for the Operational activities involved in gas and power


Short term position needs to be nominated or notified to the respective system and market operators:

  • Expected generation
  • Traded position by period with each counterparty at each location
  • Expected consumption by retail customers

This set of activities is often collectively referred to as Scheduling

The schedule of a trade describes the delivery profile (that will need to be nominated)



by Nick Henfrey - Wednesday, 15 January 2014, 7:21 AM

The Business Process or Capability covering the payments relating to trading activities. It includes agreeing payments, making them, and ensuring that payments are received at the correct times


Settlement includes:

We also referred to the concept of financial and physical settlement of trades

We need to be careful to recognize the legal definition of settlement of a physical trade:

Most other parts of energy trading businesses identify the term settlement with cash settlement (or payment)



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


Speculative Trading

by Nick Henfrey - Monday, 13 April 2015, 6:00 PM

Speculative trading, also known as proprietary or spec. trading, is the trading of commodities with the intent of making a profit with no intent to make or take delivery of those commodities


Spec. traders take forward positions, either short or long with the view to closing out those positions at a later date, prior to delivery

Closing out the open position involves trading to flatten the net position, eventually (but before delivery) to zero



by Nick Henfrey - Monday, 13 April 2015, 6:01 PM

A spot trade in general refers to a trade with immediate delivery. In energy trading terms it usually refers to a trade with delivery on the day it is executed (within day) or for the following day (day ahead)


There is usually high volume trading in spots, particularly for power and gas, as speculative traders try and close out their positions as delivery times approach, and asset-backed traders try to balance, and financially optimize their positions. A large proportion of spots are traded on Exchanges and through Brokers

Spot trades are settled physically, and even if executed on an Exchange are often settled by invoice and payment within a day or two of delivery

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