Good Morning,

On Monday’s we look at the front, which we define as Feb and in. Our tool of choice is Ansergy’s proprietary ranking system, aptly named APT (Algorithmic Power Trading). Weak traders hate it; they hate anything that might jeopardize their jobs; strong traders love it, they love anything that might jack their bonuses. Weak hedgers hate it; they hate anything that might jeopardize their jobs; strong hedgers love it, they love anything that helps them hedge. We love it.

APT – Best

APT sorted ascending on Rank.

Highlighted trades are discussed below. APT publishes a sentiment on 388 WECC term products, updated 1-2 times a day. The ranking algorithm is complex, way too much so to explain here. If you’d like to learn more, contact me. You can also subscribe to our daily APT Product – “Energy Oracle.” In that service, we discuss four trades a day. In my post, I consider as many as I find interesting.

OMG! The roll has been destroyed off of a two day slightly warm anomaly in NP. Sorry, just don’t “buy” the meltdown, but would buy the roll for size, especially after the Tuesday cash has been excluded.

Similar trade, except spreading the On against the Off. But wait, didn’t we see off Sunday settle higher than the Monday? And don’t we see a reversion to the mean temperature wise? And and and … yours, not mine, we’d short it gladly.

More fun and games, now the scrum is in Novy, and the world just changed; a really big paradigm shift… or not. Now SP is gold and NP is dust. Hah, yours again …. we’d own this all day long.

I had to look hard to find any MidC’s out of the APT Best, this one kind of jumps out, only because it is trading at a contract low. So what do we know about Dec? Low reservoirs, cash traded premium to the off Friday, and … nothing else. We do think there will be at least one cold snap between now and the first day of delivery and when that occurs the on/off will blow out. Can this get lower? Sure, it just might, but we’d rather not wait and are buyers.

There are many more SP and NP ops, but they are all the same trade, pick your poison but make sure the label says “FADE.”

APT – Rising

APT sorted descending on “WoW” – Week on Week change in rank. These are the rising stars, the trades that are growing more compelling.

This strong ISO cash market has skewed all ranks rendering good MidC or PV opps harder to find. Here are a couple of the most significant moves for MidC that warrant discussion:

Most telling is the massive volatility in the Dec-Nov roll; one would think the relative values of the two periods would be stable; one would be wrong. We flagged this a week ago as a massive buy; then it was short, now it’s nothing. Not sure what’s going on here, probably symptomatic of an illiquid and abysmal term market. No position.

APT flagged this as a short a few weeks back, seems ti was right, now the market has rallied, but we don’t love it; there is way better action/risk/reward in the front of this week’s curve.

APT – Falling

Shooting stars and falling stars, we think they are all equally compelling. The former is new opportunities; the latter are lost opportunities, or signals to liquidate.

See-saw; up, down; now slightly up. Easy to see why the position is no longer compelling, not like it was last week.

Finally, a Palo trade, but alas, the trade was valid a week ago; now it isn’t. How quickly the market loses its love for something, a sure sign of the insipid illiquidity of WECC term, especially Palo.

More spurned love, this time with a spread, though this one still has room to fall further. But, with strong cash for the next couple of days, it might actually rally. If it does, we will jump on the short side.

Conclusions

Enjoy your day and see you at WSPP.