Did you really say almonds, the fruit, or was it a typo?
How much money can you make trading electricity futures?
- Thread starter Con1991
- Start date
Did you really say almonds, the fruit, or was it a typo?
The exchange margin is actually almost completely irrelevant. The real issue is that you simply can't just go to an exchange somewhere and see a bid/ask. You've got brokers, in the old school "matching buyers and sellers" use of the term, who know people across the industry and work almost exclusively bilaterally (often by phone) to set up deals where often one or both sides of the deal are natural buyers or sellers. CME or ICE are just used for clearing purposes (and mostly not used at all) for deals where the price discovery was done entirely by phone. You work in the industry for a while you know who to call and when to get these kind of deals done, but absent that you aren't just typing in an order and getting it filled on an exchange like stocks or CL.
And that's not where the majority of trading is actually going on, most of it's happening in the ISO markets which is another animal entirely. Again, if you're really interested and a relatively unencumbered younger guy or gal then working a desk for a year might be a lot of fun and could get you the exposure you need. Absent that, it's just not realistic for a retail trader with no experience to do anything in this space. And I say that as an entrepreneur in the space who hates anyone who says you can't do something, so it takes a lot for me to throw water on an idea like yours.
Con1991 isn't going to trade electricity.
1) How much can I make is his/her first question.
2) Doesn't know anything about the contract.
3) Thinks he/she can make money "if you know what your doing" despite not even having looked at how it trades.
You really are very quick to dismiss aren't you? What's the real issue for you, me or someone else asking the question, or trying to learn more about the topic. That is after all, what these forums and this site is about, exchanging ideas and asking questions. I'm sorry you feel so high and mighty that you can straight off the bat say that I will never trade electricity, how nice for you to be able to see the future (no pun intended) like that. But I am here for learning, and for positive input, not for people who dismiss on the first count.
All of the experienced traders reading the OP are saying to themselves: "or how much money can you lose trading electricity". 
The US electricity market is not a market you will be able to trade. If you enjoy volatility and your commercial or investment bank can provide to PJM financial bonafides and a $200M letter of credit then maybe. It is an over-the-counter (OTC) market that requires a ridiculous amount of capital, counterparty and RTO approval, and the risk is mind numbing. Most of the participants have a commercial requirement - although there are a handful of very deep pocketed spec participants (think multi billion dollar AUM hedge funds).
It is also a segmented market that requires a very deep level of fundamental knowledge about demand, generation and transmission. Most of the trading is done OTC by RTO approved parties.
The short term markets (hourly, daily, weekly) are organized by regional transmission organization (RTO) - PJM and ERCOT are two examples. For the shorter term markets an authorized trader will trade directly through the RTO. For longer term markets you will deal directly with a counter party (such as a utility or merchant generator) or will be matched with a counter party by an OTC broker (Amerex, Tradition, ICAP/Garban are prominent ones). The longer term trades are OTC bilateral physical or financially settled contracts. If you are trading a financially settled contract it will likely go through ICE and be cleared by the LCH.
The short term market volatility is the highest of any trading instrument known to the human race. In the Summer and on occasion during Winter there can be 1,000 percent volatility in a few hours time.
Citadel folded its power trading subsidiary over losses in PJM. I saw Deutsche Bank lose well into eight figures in about three hours time in the ERCOT hourly market (was told by a couple different brokers).
A Commercial with generating assets has a considerable advantage.
The US electricity market is not a market you will be able to trade. If you enjoy volatility and your commercial or investment bank can provide to PJM financial bonafides and a $200M letter of credit then maybe. It is an over-the-counter (OTC) market that requires a ridiculous amount of capital, counterparty and RTO approval, and the risk is mind numbing. Most of the participants have a commercial requirement - although there are a handful of very deep pocketed spec participants (think multi billion dollar AUM hedge funds).
It is also a segmented market that requires a very deep level of fundamental knowledge about demand, generation and transmission. Most of the trading is done OTC by RTO approved parties.
The short term markets (hourly, daily, weekly) are organized by regional transmission organization (RTO) - PJM and ERCOT are two examples. For the shorter term markets an authorized trader will trade directly through the RTO. For longer term markets you will deal directly with a counter party (such as a utility or merchant generator) or will be matched with a counter party by an OTC broker (Amerex, Tradition, ICAP/Garban are prominent ones). The longer term trades are OTC bilateral physical or financially settled contracts. If you are trading a financially settled contract it will likely go through ICE and be cleared by the LCH.
The short term market volatility is the highest of any trading instrument known to the human race. In the Summer and on occasion during Winter there can be 1,000 percent volatility in a few hours time.
Citadel folded its power trading subsidiary over losses in PJM. I saw Deutsche Bank lose well into eight figures in about three hours time in the ERCOT hourly market (was told by a couple different brokers).
A Commercial with generating assets has a considerable advantage.
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Great pub but at $2K per year its expensive if you're not actually in the industry. Hard to put together quality stuff at a reasonable per subscription price when your target audience is so small, so I don't begrudge them that.
Sorry to bust your bubble but you are wasting peoples time with questions like this. How on earth would a retail trader compete with industry professionals that intend to take delivery of these futures? How could a demo account guy suddenly know how to trade such an illiquid market? It ain't going to happen.
You are WASTING YOUR TIME even thinking about it. Just stop. BTW- "7 figure days"? Really? Just concentrate on trying for low 3 figure days.