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Free Simple Glossary of Energy Trading terms
For more detailed explanations try the Detailed Glossary
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Derivative | ||
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A type of trade or instrument which has a value dependent on an observable value, which is usually, but not always, the price of a physical commodity. The observable value is called the underlier For much more information please refer to the Detailed Glossary | ||
Commodity | ||
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In Energy Trading a commodity is generally either a form of energy itself, or a physical material that may be used to easily provide energy, or a related commodity or service. The most common commodities are oil, gas, electricity (power) and coal For much more information please refer to the Detailed Glossary | ||
Physical | ||
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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 For much more information please refer to the Detailed Glossary | ||
Instrument | ||
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At its most abstract an Instrument is a category of trade types For much more information please refer to the Detailed Glossary | ||
Execution | ||
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In trading terms execution is the act that makes a trade a legally binding contract between the trading parties For much more information please refer to the Detailed Glossary | ||
Option | ||
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At its simplest an energy option is an instrument that gives the buyer the right, but not the obligation, to buy, or to sell, a commodity at a specified price at some point in the future.
More complex options may be financially settled, the payout being dependent on some condition(s) being met, and varying with some observable value(s) at the time of exercise
There is usually a single non-refundable payment made by the buyer of the option (the holder) to the seller of the option (the writer) - this is the option premium
For much more information please refer to the Detailed Glossary | ||
Spread | ||
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A spread is a difference in price, or value, of two similar but different underliers For much more information please refer to the Detailed Glossary | ||
Futures Contract | ||
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A Futures Contract is an agreement to buy or sell a commodity at a fixed time in the future executed on or with an Exchange For much more information please refer to the Detailed Glossary | ||
Margining | ||
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Margining is a form of Settlement, whereby exposure to Credit Risk between two parties is limited by keeping the overall Credit Exposure below a certain threshold by means of Margin payments between the parties whenever the threshold is breached For much more information please refer to the Detailed Glossary | ||
Settlement | ||
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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 For much more information please refer to the Detailed Glossary | ||