Fundamentals of Trading

Fundamentals — Markets & Trading

About the Course

Acquiring insight and knowledge of:

  • The fundamentals of (energy) trading & risk management;
  • The role of trading (organisations) and the interaction with the in/external environment;
  • The role of risk management and its position within organisations;
  • The role of regulation and the consequences for organisations and their environment;
  • The role of accounting (rules) for trading(-related) organisations.

Course Contents

Liberalisation of the Energy Markets

What is aim of liberalisation? What are the consequences? The EU 3rd energy package.

Risk – What is it?

Risk and return; risk-reward ratio; risk versus uncertainty; quantification versus qualification of risk.

Market risk – What is it?

Price risk; hedging; market characteristics, such as location, delivery time/period, time to maturity.

Risk management

Identification of risk, measuring risk and control of risk; liquidation, insurance and hedging.

Volatility – What is it?

The concept volatility explained; the calculation and the interpretation of volatility figures.

Counterparty risk – What is it?

Credit risk and delivery risk; the consequences of hedging for market risk and counterparty risk.

Credit risk management

Clearing; the concept of netting; credit limits; ratings; sleeving; systemic risk and regulation.

Liquidity & Liquidity risk

Market liquidity versus funding liquidity; indicators for market liquidity; position limits.

The trading organisation – The role of trading business unit

Interaction between the sales department and trade and between generation and the trading unit.

The trading organisation – Front, Middle & Back Office

Departments and sub-departments within the trading business unit, and their role.

Trading – What is it and how is it organised?

Trading versus procurement and sales; decision making & connectivity; trading tools & data.

Trading – The reasons for concluding transactions

About procurement, sales, balancing, hedging, arbitrage and speculation. Why is it applied?

Trading – The order book

How does trading take place? How are prices set? What orders are executed? When? How?

Trading – Order types

What order types are applied and for what reasons? Market, limit, all-or-none, iceberg & stop-loss order.

Trading process – Clearing

Central counterparty; clearing house & clearing members; credit risk; margining & collateralisation.

Trading process – Settlement

Physical delivery versus cash settlement; settlement procedures; examples with calculations.

Trading process – Transaction flow

Pre-trade, trade and post-trade processes; tasks & responsibilities of front/middle & back office staff.

Trading process – ETRM system

The task of energy trading and risk management software; the users and purposes of the tool.

Markets & Products – Spot versus Forward

The difference between spot/prompt and forward/futures markets, prices and transactions. 

Markets & Products – Derivatives

What are derivatives? What are these financial instruments used for? By whom are these tools applied?

Markets & Products – Forwards versus Futures

What is a forward or futures contract? What are the differential between those? Contract specs.

Markets & Products – Contract for difference

What is a CFD? What are CFDs used for? Where can the instruments be traded? How are these settled?

Markets & Products – Swaps

What is a swap? What types of swaps are available? What is their purpose? How are swaps settled?

Markets & Products – Options

What is a call or put option? How can these tools be applied? How does pricing of options take place?

Trading platforms – OTC markets & trading

How can OTC market be characterized? How is OTC trading organized? What are master agreements?

Trading platforms – Brokerage services

What is the role of a broker? What are the differentials between inter-dealer brokers and broker-dealers?

Trading platforms – Exchange trading

What features does exchange trading have? How is it organized? What fees are in place for members?

Trading platforms – Trading screens & platforms

What details are relevant to traders? What is Trayport, how does it work and why do traders use it?

Pricing, price drivers & indexation

How do prices arise in the market? What factors drive prices? What is an index? What is it used for?

FX markets & trading

Forex exposures of companies; the role of the treasury department; currency pairs; exchange rates.

Accounting – Mark-to-Market

Bookkeeping; accounting rules; the differences & consequences of M-to-M vs. historical cost accounting.

Accounting – Book structure & Internal transfers

How do firms organize in-house trading, between trade and other business units? Why? At what price? 

Terminology – Upstream, midstream & downstream

Explanation of the terminology which is related to the value chain.

Terminology – Opening & Closing, Long & Short, Bull & Bear

What do the concepts of long or short imply? Likewise for bullish or bearish, or opening or closing.

Exam & Certification

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With no time-to-market, any learner can buy a licence for 365 days access. Alike Netflix, we provide 24/7 access to all listed courses and exams. Self-study in own time and at own pace, with instant certification upon passing an exam. Access-to-all is provided upon the purchase of a learning licence, one for each learner. Discount for group. Observe our ultra-quick customer on-boarding.

Our Purpose

Entrima provides learning services for professionals in the commodity & energy markets.

Content & Context

Entrima’s mission is to transfer knowledge regarding the business, controls & operations of parties in (or relating to) the wholesale markets.

Conduct & Culture

Entrima mission is to facilitate the prevention & detection of misconduct and to foster proper behaviour in organisations. This is achieved via training, periodic updates and increased awareness.