This text introduces the fundamentals of trading energy futures and options. It addresses the market mechanism; fundamental analysis; the behavior of futures prices, arbitrage, and rolling strategies; speculation and spread trading; hedging; option valuation; energy options strategies; the evolution of energy markets; the history and growth of derivatives markets; and other topics. This edition provides a more comprehensive overview of what traders and investors can look at when entering into energy trading and has new chapters on market efficiency, the introduction of energy and other commodities in Modern Portfolio Theory, swaps, and fundamentals; expanded chapters on technical analysis and options; and discussion of the role of ETFs (exchange traded funds) and ETNs (exchange traded notes) in the commodities markets. Annotation ©2018 Ringgold, Inc., Portland, OR (protoview.com)
Trading in energy futures and options plays a key role in hedging against fluctuations in the price of energy commodities, especially crude oil and natural gas. This long-awaited new edition highlights how exchange-traded futures and options markets work and how companies can successfully use the markets in their overall strategy to increase profitability. This wide-ranging new edition offers valuable insight for young professionals and students. Discussions on market efficiency, the role of commodities in Modern Portfolio Theory, and the NYMEX introduction of Clearport are all covered in this introduction to futures markets.
| Preface |
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ix | |
| Acknowledgments |
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xi | |
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1 | (3) |
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1 | (3) |
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2 Commodity and Options Contracts and Markets |
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4 | (7) |
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6 | (1) |
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Comparison of Forward and Futures Contracts |
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6 | (1) |
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Commodity Futures Exchanges |
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7 | (2) |
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9 | (2) |
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11 | (16) |
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11 | (1) |
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12 | (3) |
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15 | (1) |
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Exchange of Futures for Physicals |
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16 | (1) |
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Brokerage Firms and Commissions |
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17 | (2) |
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Monitoring Trading Procedures |
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19 | (4) |
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23 | (4) |
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27 | (18) |
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Efficient Market Hypothesis |
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27 | (3) |
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30 | (3) |
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33 | (1) |
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34 | (6) |
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40 | (1) |
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41 | (1) |
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42 | (3) |
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5 Energy and Other Commodities in Modern Portfolio Theory |
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45 | (16) |
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46 | (4) |
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50 | (8) |
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58 | (1) |
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59 | (2) |
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61 | (28) |
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62 | (8) |
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70 | (12) |
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82 | (3) |
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85 | (1) |
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86 | (3) |
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7 Behavior of Futures Prices, Arbitrage, and Rolling Strategies |
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89 | (22) |
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Principles of Futures Prices |
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89 | (2) |
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Structures of Futures Prices |
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91 | (5) |
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96 | (4) |
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100 | (5) |
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Rolling Strategies for Commodity Indexes |
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105 | (4) |
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109 | (2) |
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8 Speculation and Spread Trading |
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111 | (18) |
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Speculation and Position Trading |
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111 | (2) |
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113 | (4) |
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117 | (12) |
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9 Technical Analysis and Quantitative Analysis |
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129 | (36) |
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129 | (3) |
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132 | (17) |
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149 | (12) |
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161 | (1) |
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162 | (3) |
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165 | (18) |
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Long and Short Cash Positions |
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166 | (1) |
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Perfect Hedging: Risk Elimination |
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167 | (3) |
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170 | (2) |
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172 | (1) |
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173 | (1) |
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Selective or Anticipatory Hedging |
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174 | (1) |
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175 | (1) |
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Hedging in Energy Futures |
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176 | (2) |
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178 | (2) |
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180 | (3) |
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183 | (8) |
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183 | (2) |
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185 | (4) |
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189 | (1) |
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190 | (1) |
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12 Introduction to Options and Futures |
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191 | (16) |
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191 | (4) |
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195 | (1) |
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196 | (1) |
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197 | (3) |
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200 | (5) |
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Margin Requirement and Option Exercise |
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205 | (1) |
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206 | (1) |
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206 | (1) |
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207 | (22) |
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Price of Forwards and Futures |
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207 | (1) |
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208 | (6) |
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Black-Scholes Model for Valuing a Stock |
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214 | (4) |
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Black's Model for Futures |
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218 | (2) |
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220 | (1) |
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221 | (4) |
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225 | (1) |
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226 | (1) |
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226 | (3) |
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14 Energy Options Strategies |
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229 | (26) |
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229 | (1) |
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230 | (1) |
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231 | (3) |
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234 | (3) |
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Hedging Positions in Options |
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237 | (8) |
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245 | (1) |
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Hedging Risk when Selling Options |
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246 | (6) |
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252 | (1) |
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253 | (2) |
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15 Evolution of Energy Markets |
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255 | (6) |
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Structural Changes in the Energy Industry |
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255 | (2) |
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257 | (1) |
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258 | (3) |
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261 | (1) |
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16 History and Growth of Derivatives Markets |
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261 | (30) |
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Structural Changes in the Derivatives Market |
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261 | (9) |
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Benefits of Futures, Swap, and Option Markets |
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270 | (5) |
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Consolidation in Commodity Markets in the 2000s |
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275 | (12) |
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After the 2007--2008 Financial Crisis |
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287 | (2) |
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289 | (2) |
| Appendix: Important International Organizations and Websites Related to Trading Energy Commodities and Futures |
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291 | (4) |
| Index |
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295 | |
Luc Marest is a visiting assistant professor in the Department of Economics at Queens College, City University of New York, where he teaches courses on finance. His research interests include monetary theory, business cycle theory, finance, financial markets, trading, and international finance. Marests career started in France at Bouygues, one of the worlds largest construction companies, where he was a project manager. He also worked on Wall Street as a trader for Worldco LLC. Luc Marest holds a masters degree in civil engineering from LEcole Speciale des Travaux Publics, Paris, an MBA from the Yale School of Management and a PhD from the Department of Economics at The Graduate Center, City University of New York.
Steven Errera, former president of Energy Futures, Inc., is noted in his field as a lecturer and writer, having contributed articles to many economic and energy-related publications. He is a former vice president of the New York Mercantile Exchange, where he was responsible for writing and marketing its No. 2 Heating Oil Futures Contract. He has an MBA from Rutgers University and a BA from Queens College, CUNY.
