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

A crack spread reflects the refining margin between buying crude and selling products like gasoline and diesel.

Question 2

In backwardation, near-term futures prices are typically:

Accepted Answer

Higher than longer-dated futures prices

Answer

Backwardation occurs when prices for nearer delivery are higher than those for later delivery, often signaling tight supply.

Question 3

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

Accepted Answer

Revaluing the position daily to current market prices

Answer

Mark-to-market accounting updates the value of open positions each day based on prevailing market prices.

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 call option grants the right to buy the underlying at the strike price without obligating the holder.

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

A trading desk executes transactions and manages the firm's market exposure across energy products.

Trading Jobs Practice Test