Calendar spreads, or time spreads, describe the price differential – or spread – that may arise between differently dated futures contracts. For example, the price difference between contracts for first- and second-month light, sweet crude offered on Nymex. Time spreads can be mitigated by purchasing options on the difference between average annual prices. In effect, such options provide protection against a reshaping of the forward price curve.
The term is also used for trading in which the parties buy a certain number of futures contracts for a specific month and simultaneously sell the same number of futures contracts for a different month.
The Energy Risk Glossary, now in its eighth edition, provides an at-a-glance explanation of the myriad specialised terms and acronyms used in energy trading and risk management.
This year, the guide has been updated by Aviv Handler of ETR Advisory. Energy Risk would like to thank him for his input into this edition, which benefits greatly from his valuable experience and insight into energy markets.
The fast-changing nature of these markets means much has changed since our last edition – almost 200 new entries and revisions have been made this year. Reflecting the increasing importance of regulation, definitions of the Markets in Financial Instruments Directive (MiFid) and the Ljubljana-based Agency for the Cooperation of Energy Regulators (Acer) make it into the glossary for the first time. A focus on improving back-office infrastructure and mitigating counterparty risk is also apparent from the inclusion of terms such as ‘portfolio reconciliation’ and ‘portfolio compression’.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find it useful.
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