Trading Jobs Energy Trading For Dummies 2

Question 1

What does the term 'spark spread' measure in energy trading?

Accepted Answer

The profit margin between natural gas input cost and electricity output price

Answer

The difference between crude oil and gasoline prices

Answer

The interest rate on a commodity loan

Answer

The volatility of solar power generation

Question 2

In a contango market, what is the relationship between futures and spot prices?

Accepted Answer

Futures prices are higher than the spot price

Answer

Futures prices equal the spot price exactly

Answer

Futures prices are lower than the spot price

Answer

There are no futures prices available

Question 3

What is the primary purpose of a hedge in energy trading?

Accepted Answer

To reduce exposure to adverse price movements

Answer

To guarantee a profit on every trade

Answer

To eliminate all transaction costs

Answer

To increase leverage indefinitely

Question 4

Which benchmark is the primary price reference for North American crude oil?

Accepted Answer

West Texas Intermediate (WTI)

Answer

Brent Blend

Answer

Dubai Crude

Answer

Urals

Question 5

What does 'Henry Hub' refer to in natural gas markets?

Accepted Answer

The benchmark pricing point for US natural gas futures

Answer

A type of pipeline compressor station

Answer

A regulatory agency for energy trading

Answer

An offshore drilling platform

Question 6

What is 'basis risk' in energy trading?

Accepted Answer

The risk that the price difference between a hedge and the underlying asset changes

Answer

The risk of a counterparty defaulting

Answer

The risk of a regulator banning a product

Answer

The risk of currency fluctuation only

Question 7

Why do energy traders monitor weather forecasts so closely?

Accepted Answer

Weather drives demand for heating, cooling, and power generation

Answer

Weather sets the official exchange settlement price

Answer

Weather determines pipeline ownership

Answer

Weather is required for margin calculation