Electricity Trading

Discussion in 'Commodity Futures' started by quechua, Jan 15, 2019.

  1. quechua

    quechua

    Hi all,

    I am an electrical engineer in power area. I know how the system works but I am pretty inexperienced and uneducated in economics, especially trading, especially commodity trading and especially power trading.

    I hava a couple of questions that will (probably) seem extremely stupid to you. I haven't slept in almost 30 hours reading about all. From microeconomics to day-trading. So, your help will be greatly appreciated.

    1. First thing is first. I am neither a US citizen nor US-resident but I have an SSN (I was an exchange student in US). Do I have a right to trade in US markets ?

    2. Can individuals like me trade electricity like Apple stocks ? Electricity is different than oil because it needs to be consumed as it is produced, no storage. Some of my fellow engineers think that only utility companies or generators can participate in power market. Can we buy and sell futures, etc. ?

    3. If so, could you recommend an online broker ? Preferably one with a simulator, too. Also, I don't want to put $5000 right away :)

    4. Is there anyone who trades power and wants to be friends ? I can help you with all the technical aspects of electricity grid and some tools for load forecasting to improve your trading skills.

    Thank you in advance.
     
  2. Overnight

    Overnight

    I recommend losing a few more hours of sleep reading some of the past threads here on the subject...

    Here's a couple...

    https://www.elitetrader.com/et/threads/electricity-futures.315660/

    https://www.elitetrader.com/et/threads/trading-cme-listed-electricity-futures.317842/

    https://www.elitetrader.com/et/threads/electricity-futures.278499/

    https://www.elitetrader.com/et/threads/real-time-power-trading.224251/
     
    tommcginnis likes this.
  3. bone

    bone ET Sponsor

    I am an engineer by training as well.

    I have personally traded bilateral physical power, transmission rights, and exchange cleared financially settled power swaps. (at a major US electricity generating utility and at a Hedge Fund)

    It requires (depending upon what you want to do) tens or hundreds of millions of dollars in margin and in some cases physical assets like power generating plants and connection to an ISO grid. I know of no other asset in the world more volatile than hourly power in the summer months.

    Load forecasting and advanced modeling will do you no good when AEP or Exelon loses a generating unit. They will run everyone over to cover their generating deficit before word gets out. I've seen 700 percent [and higher] intra day volatility during the months of July and August on the INC/DEC markets. I know of a famous Investment Banking Desk that lost $20M in a single day in ERCOT - confirmed by a broker. I've heard of much worse.

    It's an adult swim and it is very niche. Highly specialized.
     
    tommcginnis, cvds16, fan27 and 2 others like this.
  4. Robert Morse

    Robert Morse Sponsor

    It is my understanding that most FCMs do not allow trading in Electricity Futures except for hedgers with a balance sheet as volume and OI are very low.
     
  5. Sig

    Sig

    What @bone said! Couldn't agree more.
     
    bone likes this.
  6. gaussian

    gaussian

    I am sure you are a fantastic engineer. However, this doesnt make you a good power trader. Electricity is notoriously difficult.

    The good news is your skills in EE (particularly signals analysis) will translate well to market analysis if you can make the leap.

    Regarding simulators, they are a waste of time. Trade small lots with low risk so you learn the markets with some skin the game. It's the only way you'll be able to make the transition. Paper trading builds bad habits. Good luck.
     
    cvds16 likes this.
  7. bone

    bone ET Sponsor

    Problem: Unless the dude can put tens of millions of dollars into an account, there's no way an FCM is going to let him trade ClearPort or ICE Swaps.

    In terms of the hourly market - ISO's have escalated the Hedge Fund capitalization requirements after getting burned a few times so safe to say as a private equity entity he'll require tens of millions of dollars in order to trade the INC/DEC market.

    His best bet is to sharpen his computer modeling skills and get on board a utility power trading desk. And those opportunities are quite rare.
     
    MoreLeverage and gaussian like this.
  8. gaussian

    gaussian

    Absolutely, I figured this was made clear by the other posters. I mostly was referring to his ability to trade in general. Certainly with the crazy spreads and such his only job is at the desk of a power company.

    For what it's worth - related to that I've looked into positions on a nat. gas desk at the local gas company and they are certainly rare. Especially junior positions. He's really going to have to grind.
     
    MoreLeverage likes this.
  9. quechua

    quechua

    This single thread was more helpful than all my readings. Thank you guys.

    I am not in a hurry. I plan to spread it to 5 to 10 years and train myself in economics. I think my engineering math & programming background will be helpful.

    To be honest, I didn't wake up one day and decided to trade.

    A friend of mine blew my mind. He doesn't tell us much but he has an app or computer software that automatically trades foreign currency between multiple currencies. He only told us that depending on the trend, he just buys and sells hundreds of times and those small profits stack up.

    I learned that he makes the money I would earn as an engineer (in a month) in only a week without ever going to work. That's why I started researching. I thought my engineering background would be helpful for power trading but here I am, it seems impossible without big money.

    But I will not stop. Maybe I will go after an MBA or masters degree in finance.
     
  10. comagnum

    comagnum

    Speaking of electricity traders, remember Enron?

     
    Last edited: Jan 16, 2019
    #10     Jan 16, 2019