Brent-WTI spread: Fundamentals, implications & options tradi…

Energy Trading Project for master degree essay with also calculations graphs tables and equations (1500 words) with references and one page appendix I want the subject on the Brent WTI spread Energy Trading Group Coursework This coursework carries 35% of the overall mark for the Energy Trading module and should be completed in in set groups (already allocated). Deadline: february 25 23.30 Notes: – All calculations should be submitted, e.g., excel spreadsheets. – Tables/figures should be professionally presented. Please avoid using colours and/or shading in table cells. – Number equations, tables and figures consecutively in accordance with their appearance in the text and place any notes below the table/figure body. – Answers excluding tables, equations, figures, computer output and references, should be limited to no more than 1,000-1500 words in total. – Use literature on all tasks if you are aiming to score high! Use a minimum of 4-5 references. – Tables containing summary of the results should be included in the main text – next to the relevant text (not at the end) and should include proper headings and explanatory notes. Avoid copy/paste of tables of computer output and or excel data. Better merge all information you want to show in 1 table per task. – Mention clearly and explicitly any assumptions you need to make to solve the problems. – The coursework must be submitted on Blackboard time. Work submitted late will be penalised. – Any attempt of copying or replicating other groups work will be considered as plagiarism and will result in the failure of the assessment. Courswork task 100% You are working as an analyst for a commodity trading house. You just received the following email from your boss: I have been contacted by S&P Global Platts. They want us to write an article strictly limited to 1000-1500 words (no less no more excluding tables/figures). Topic Options (any of the following): 1. Basis risk in crude oil spot-futures markets: Fundamentals, implications & options trading strategies. 2. Calendar spreads in commodity markets: Fundamentals, implications & options trading strategies. 3. The Brent crude oil benchmark: Fundamentals, implications & options trading strategies. 4. Brent-WTI spread: Fundamentals, implications & options trading strategies. 5. Crude oil-natural gas spread: Fundamentals, implications & options trading strategies. Specific Requirements: Choose one commodity market (either single commodity or futures-spot) or two commodities. Utilise data from the last 3-10 years to back up your arguments. Use a maximum of 6 graphs and 2 tables (which will not be included in the word count). Incorporate relevant evidence from reputable sources, including industry reports, academic articles, or trade publications. Provide a thorough description of the selected commodity/spread and its significance in the global energy markets. Analyse historical price trends or key events that have influenced market dynamics. Discuss how historical contexts impact present trading strategies and highlight emerging trends, including relevant regulatory and technological advancements. You may also engage with topics such as arbitrage, supply/demand dynamics, and effects of extreme events (e.g., natural disasters), etc. Technical Requirements (options trading): Reserve at least 200-300 words at the end of your article for the following task: Make an informed decision (timeframe is up to you) about market conditions focusing on logical reasoning (will be based on your beliefs and your previously discussed arguments/market insights not quantitative models): Price Prediction: Assess whether prices are likely to increase or decrease. Recommend an options trading strategy involving more than one option (based on your analysis) to take advantage of the suggested price increase/decrease. Volatility Prediction: Evaluate expected changes in volatility. Propose a suitable options trading strategy involving more than one option (based on your analysis) to take advantage of the suggested volatility increase/decrease. Include visual components: Your options analysis should consist of graphs illustrating the potential payoff of the recommended strategy and a table summarising reasonable assumptions regarding strikes and premiums. Clearly identify breakeven values, maximum profit, and maximum loss. Include a 1-page appendix to represent the result of combining the two strategies mentioned above. No other appendices are allowed. General Guidelines This is a scientific-opinion article, so no additional guidelines are provided. Treat this as a competition-like project, encouraging creativity in your writing. Note on the assumptions for Options When assuming premiums for options, consider these approximate market conventions: o At-the-Money (ATM) Calls/Puts: Typically around 5% to 10% of the underlyings value. o In-the-Money (ITM) Calls/Puts: 10% to 20% or more of the underlyings value, accounting for intrinsic and time value. o Out-of-the-Money (OTM) Calls/Puts: 1% to 5% of the underlying’s value, primarily reflecting time value. Note also that strike of ATM = todays price, i.e. S = X. For OTM, ITM you may make assumptions as you deem necessary. For example, one way of showcasing your result would be, e.g., if S = 100 I can use X =100 as ATM, X=110 as OTM and X = 90 as ITM, i.e, +/-10% up/down. ATM call premium of 7.5, ITM call premium of 15, OTM call premium of 2.5.