Free Simple Glossary of Energy Trading terms

At its most abstract an Instrument is a category of trade types

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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

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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

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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

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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

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A group of trades

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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

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Location is one of the key dimensional attributes of all physically settled, and many financially settled, trades

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A market maker quotes prices at which they are prepared to buy or sell a commodity - usually on an Exchange or with a broker

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Physically settled trades have a delivery time or period specified in the terms (details) of the trade

Delivery is the physical act of delivery of the traded commodity at the location and time specified in the trade details

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