What is traded?
Practically any type of energy or energy resource for which sufficient supply and demand exist can be traded. “These are mainly electricity, CO2 allowances, gas, coal and oil,” says energy expert Andreas Koslowsky. These so-called “commodities” are physically traded. Koslowsky: “this means that, for example, an actually existing amount of electricity or gas is bought, delivered at the agreed date and time and then billed. We distinguish between the spot market, where buying takes place on one day and selling on the following day, in the following week or in the following month, and the forward market with long-term products or “forwards”. These assign the physical delivery of, for example, electricity or gas to a future date.
Futures are another product. They indicate daily, after the markets close, what the market price for electricity will be on a specified date in the future, for example in the following year or the year after that. The difference to the buying price is paid out in cash on the delivery date for the futures. Then it will show if the “bet” has paid off. The profit can be put into the bank or used for other transactions.
The traders are always on the lookout for opportunities to make financial gain for RWE from differences in the price for commodities, between delivery regions and on different delivery dates. Are commodities overvalued or undervalued? This is where the trader’s instincts come into play. Number crunching alone does not guarantee success.