Advanced International Oil Trading - Instruments, Strategies and Techniques (CLASSROOM) - TR3
Course Summary
This course addresses the risks associated with oil trading focused on price. Building on material taught in TR1, this course covers the more advanced aspects of price risk management focussing chiefly on paper aspects. Specific exercises will address each technique used in the management of risk. The course commences with a half-day fast track recap of the key issues covered in TR1 prior to moving into the key issues, the identification of risk, the tools available and the mechanisms used to manage it. The theory and mechanics of advanced instruments including swaps, CFDs, traded and OTC option are explained. Their use in developing effective trading strategies is discussed and practiced in detail.
An ongoing case study over the week will allow each group to manage a portfolio of their own group positions from a risk management perspective. In parallel, delegates will have the opportunity to trade the live markets. It is recommended that delegates should have attended TR1 or have a strong working knowledge of the subjects covered in that course.
What Will You Learn?
- Risks associated with physical oil trading and the paper markets
- The management of price independent of the physical deal
- The use of forward markets in hedging and price management
- The use of futures in hedging and price management
- The use of swaps markets and strategies
- Option theory and the behaviour and use of traded options
- The theory and applications of Brent CFDs
- The behaviour and use of over-the-counter (OTC) options
- The use of EFP and EFS to manage price risk
- Trading the forward curve
- Trading strategies appropriate to market participation of a producer, refiner and consumer
- Use of technical analysis
Who Should Attend?
Personnel who have recently entered trading and need to increase their knowledge of derivatives and personnel in associated industries who wish to increase their knowledge of practical derivatives used by the oil industry.
Course Content
Introduction
- Physical, forward and futures markets
- Market structure
- Freight
Basic Risks
- Correlation and selection of hedge
- Spread trading and trading market structure
Futures Markets
- Trading strategies with futures
- Crack spreads
- EFP and EFS
Forward Markets
- Nature of forward markets
- Interrelation of Brent Forwards to Brent Dated
- Link to the CFD
Swaps
- The swap markets
- Swap trading strategies
- Hedging with swaps versus futures or forwards
- Swap valuation
- Hedging with Contracts for Differences
- CFDs and the Dated Brent market
Traded Options
- Behaviour and use of options
- Option valuation, binomial, Black Scholes
- Synthetic options
- Intrinsic and time values, historic and implied volatility
- Significance of gamma, delta, vega, theta
- Delta hedging and the option trader 's perspective
OTC Options
- American, Asian, European
- Collars, straddles and strangles
- Swaptions - extendibles, double-ups
- Successful trading strategies for producers, refiners and consumers
- Selling optionality and monetisation of options
Shipping and Freight
- Freight exposure
- FFAs and futures for risk management
The Trading Manager 's Dilemma
- Risk assessment and management
- Legal and regulatory aspects
- Credit and counterparty risk
- VAR - value at risk
- Establishing trading limits
- Monitoring trading positions
Technical Analysis
- Charts, patterns and formations
- Statistical/rule based
Case Studies and Exercises Included:
- Hedging and price management of arbitrages with futures
- Valuation and hedging of physicals with Swaps
- Use of EFP and EFS in price management
- Hedging with traded options
- Delta hedging
- Hedging crude positions with all paper instruments including CFD
- FFA trading
- Refiner, producer, consumer risk management techniques
- Monetisation of refinery margin
