Recent content by contango

As an example, take the rumoured BHPB takeover of Rio Tinto. Of course this was suggested years ago by BHP's then chairman (Brian Gilbertson) which was the reason he got booted from the board i.e. too expansive at the time. Now that the commodities sector is hot the investment banks are wooing...

What is the expectation of a newbie in the front office? You get to be the butt of the jokes and do the coffee run. Smile and take it. It develops a thick skin which you're going to need for later. What is the compensation like? Not as good as the head of desk. But better than serving the...

The only programming skills you need are some basic excel skills to calculate spreads as well as a random number generator to help you decide on which positions to take. You then need a simple IF/THEN/ELSE statement along the lines of: IF losing money, get out quick ELSE if making money, plough...

The factors that go into the spark spread formula are power, natgas, conversion rate (heat rate) and plant efficiency. Each individual plant will therefore have it's own spark spread. In Europe you also need to factor in currency exchange rates and carbon prices i.e. if you're interested in the...

OPEC tries to cut but Iran, Venezuela and pals keep cheating and overselling because they need the cash. Saudi is the only responsible party and soon they are going to get annoyed that no-one is playing game. I suspect they may also pile on production soon just to teach Iran etc. who's the real...

Reason options have remained largely OTC is because the market doesn't do vanilla... Can you price me an Asian (average price) option for front month pricing 6th month Brent? Typical model for pricing APO options is Turnbull-Wakeman and not Black i.e. time to expiry is variable. Why would the...

I think ICE is regulated by the FSA as a RIE (Recognised Investment Exchange) which governs basic rules of operation. However, each trading company / hedge fund etc. will generally be regulated by domestic authorities as well. This is what I meant to say by referring to where the traders are...

From a regulatory point of view, the trading occurs where the traders are. As for Europe, there is: ICE - Brent, NBP, Zeebrugge, Power & Emissions.... EEX - Power and Emissions (mostly German) ENDEX - Dutch & Belgian Power & Gas Euronext - no energy contracts but they do quote spark &...

Most energy brokers offer their OTC clients some version of Trayport's software. I believe it handles the most liquid complex options fairly easily e.g. option on APO option on Dated Brent. It also handles swaptions on time spreads etc. Why is Parity re-inventing the wheel or are they catering...

Correlation over too long a time period becomes useless i.e. significant moves are averaged out. Correlation over too short a time period is inaccurate. What time periods do you guys use to timebucket your correlations? Gas and power prices are significantly correlated with the spread...

You could spread trade the EU carbon emissions price through a spread broker such as IG Index in the UK. If in the US, check out evomarkets as a broker.

Agree with the above. Big option buyers need options that meet their specific needs and the sellers are happy to provide for a price. Think the market will evolve to support volume on vanilla options but in the meantime call up GFI, Natsource, Evolution etc. and ask how much they'll charge...

Crude has historically been backwardated so spot is usually expected to be higher. Why would OPEC take on increased risk of ownership in a declining market...? Besides, OPEC is a representative group of producing countries responsible for only about 30-40% of global production. It takes them...

I think we've seen a healthy return to some fundamentals in the crude market and hopefully the hedge fund 'gurus' have learnt a few lessons along the way... When I said way back around the time of Hurricane Ernesto that crude was going down I had no idea it would go down so much so quickly...