The Use of Advanced Instruments in International Oil Price Risk Management

Course Summary
This course addresses the risks associated with oil trading focused on price. Building on material taught in TR1, this course covers the more advanced aspects of price risk management. Case studies will address each technique used in the management of risk. A case study with a continuous theme will also allow each group to manage a portfolio of their own group positions. Delegates will have the opportunity to trade both structured and live markets. It is recommended that delegates should have attended TR1 or have a strong working knowledge of the subjects covered in that course.

The course commences with a half-day fast track recap of the key issues covered in TR1 prior to moving into the key issues the identification of risk, the tools available and the mechanisms used to manage it. The theory and mechanics of advanced instruments including swaps, CFDs, traded and OTC option are explained. Their use in developing effective trading strategies is discussed and practised in detail. Case studies will address each technique used in the management of risk. A continuous theme case study will also allow each syndicate to manage a portfolio of their own group positions. Delegates will have the opportunity to trade both structured and live markets.

What you will learn:

• Risks associated with oil trading
  
• The management of price independent of the physical deal
  
• The trading of paper markets in hedging and price management
  
• Trading strategies with futures
  
• Use of technical analysis
  
• Option theory and the behaviour and use of traded options
  
• Swap markets and strategies
  
• The theory and applications of CFDs
  
• The behaviour and use of over-the-counter (OTC) options
  
• The trade with EFPs
  
• To trade the forward curve
  
• Trading strategies appropriate to market participation of a producer, refiner and consumer
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  Introduction
  
  
  
  • Physical, forward and futures markets
    
  • Market structure
    
  • Freight
    
  
  Basic Risks
  
  
  
  • Correlation and selection of hedge
    
  • Spread trading and trading market structure
    
  
  Futures Markets
  
  
  
  • Trading strategies with futures
    
  • Crack spreads
    
  • EFPs
    
  
  Swaps
  
  
  
  • The swap markets
    
  • Swap trading strategies
    
  • Hedging with swaps versus futures or forwards
    
  • Swap valuation
    
  • Hedging with Contracts for Differences
    
  • CFDs and the Dated Brent market
    
  
  Traded Options
  
  
  
  • Buying versus selling, the risk versus obligations
    
  • Option valuation and the Black Scholes equation
    
  • Synthetic options
    
  • Intrinsic and time values, historic and implied volatility
    
  • Significance of gamma, delta, vega, theta
    
  • Delta hedging and the option trader's perspective
    
  
  OTC Options
  
  
  
  • American, Asian, European
    
  • Collars, straddles and strangles
    
  • Swaptions
    
  • Successful trading strategies for producers, refiners and consumers
    
  
  The Trading Manager's Dilemma
  
  
  
  • Risk assessment and management
    
  • Legal and regulatory aspects
    
  • Credit and counterparty risk
    
  • VAR - value at risk
    
  • Establishing trading limits
    
  • Monitoring trading positions
    
  
  Technical Analysis
  
  
  
  • Charts, patterns and formations
    
  • Statistical/rule based
    
  
  Case Studies and Exercises Included:
  
  
  
  • CFDs
    
  • Swaps
    
  • EFPs
    
  • Technical analysis
    
  • Traded options
    
  • Refiner risk management
    
  • Producer risk management