Trading Jobs Energy Trading For Dummies 3

Question 1

What is a 'crack spread' in oil trading?

Accepted Answer

The margin between crude oil cost and refined product prices

Answer

The fee charged to crack open a futures contract

Answer

The gap between two natural gas hubs

Answer

The spread on emissions allowances

Question 2

In backwardation, near-term futures prices are typically:

Accepted Answer

Higher than longer-dated futures prices

Answer

Lower than longer-dated futures prices

Answer

Always equal to spot

Answer

Fixed by regulation

Question 3

What does 'mark-to-market' mean for an energy trading position?

Accepted Answer

Revaluing the position daily to current market prices

Answer

Selling the position to the market immediately

Answer

Marking a contract as non-tradable

Answer

Setting a fixed price for the whole contract term

Question 4

Which instrument gives the holder the right, but not the obligation, to buy a commodity at a set price?

Accepted Answer

A call option

Answer

A forward contract

Answer

A swap

Answer

A put option

Question 5

What is the main role of an energy trading 'desk' at a firm?

Accepted Answer

To execute and manage buy/sell positions in energy markets

Answer

To audit the company's tax filings

Answer

To maintain physical pipelines

Answer

To set government energy policy

Question 6

What is 'liquidity' in the context of an energy market?

Accepted Answer

The ease of buying or selling without large price impact

Answer

The amount of crude oil physically stored

Answer

The water content of a fuel

Answer

The number of regulators overseeing the market

Question 7

Why are storage levels of natural gas reported weekly important to traders?

Accepted Answer

They signal supply-demand balance and influence prices

Answer

They determine the exchange's trading hours

Answer

They set the legal tax rate on gas

Answer

They control pipeline construction permits