Longer Term Futures

This is a discussion on Longer Term Futures within the General Trading Chat forums, part of the T2W Archive category; Hello, The energy market offers future purchase investment in electricity for large consumers, ive found information at the LEBA website. ...

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Old Mar 24, 2011, 8:36pm   #1
 
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Joined Mar 2011
Longer Term Futures

Hello,

The energy market offers future purchase investment in electricity for large consumers, ive found information at the LEBA website. The company I work for buys up to five years in advance wholesale their electricit this has meant spending over to 250M. We use a lot of energy.

With the introduction of Carbon Trading I want to know if its possible to buy energy now in the futures market. Electrcity prices between now and 2030 will go up by up to 20% a year.

If I pre purchase wholesale energy and retain it to sell later it can over 5 years only go one way and massively outperform inflation

I might be talking rubbish but is this possible?

Thanks

Rob
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Old Mar 26, 2011, 8:44pm   #2
 
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Re: Longer Term Futures

robhargreaves started this thread Hi does anyone have any comments on this?
Thanks
Rob
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Old Mar 27, 2011, 7:48pm   #3
Joined Oct 2006
Re: Longer Term Futures

I don't think you can do this as an individual.
most of these markets are OTC and even if you get DMA there's not much liquidity, and you'd have to use the help of an energy trader/broker.

another way to go, is you can ask an investment bank to offer you an exotic type of option or forward for this. it'll cost you a hefty commission, but if you plan on holding this for 20 years, the calculation is rather plain.

but as a concept, it's valid.
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Old Mar 28, 2011, 11:06am   #4
Joined Feb 2011
Re: Longer Term Futures

Nothing out there on the regulated exchanges for this...can't help you there. Sorry.
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Old Mar 28, 2011, 11:22am   #5
Joined Dec 2003
Re: Longer Term Futures

Quote:
Originally Posted by robhargreaves View Post
With the introduction of Carbon Trading I want to know if its possible to buy energy now in the futures market. Electrcity prices between now and 2030 will go up by up to 20% a year.
The problem with these sorts of figures, 20% a year, is simple - compounding.

If energy costs do go up by 20% a year then within about 10 years 95% of the global population won't be able to afford it which means it won't go up 20% a year because then there is no market.

Work it out yourself, see what % of your total annual income now goes on Energy and then compound it up at 20% over 1-20 years - add a 5% rise to your salary. You'll soon see that you won't be able to afford to turn on a 40W light bulb.

Pay respect to compounding because it's a problem that's starting to hit the western world hard and few seem to realise it yet, or even understand its simple elegance.
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Old Mar 28, 2011, 7:41pm   #6
 
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Re: Longer Term Futures

Interesting. What's your company like btw? I am sorry but i think your company is really unfair for thinking or doing things like that. It will affect all countries for doing such crime. read this one moneyplansdotnet. This will help you understand the crisis we are going through.
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