CH_TRADE - Oil Trading Exercise


This is a demonstration of an oil trading exercise used in the selection of analysts and associates.  The demonstration operates for a trading period of 22 days, with each day lasting for 12 seconds in real time.

You can buy and sell oil in two ways:

·        Buy and sell with the spot market.  You do this by selection the number of barrels you want to trade from the drop down menu and then hitting ‘BUY’ or ‘SELL’.  There is a charge for selling to the spot market.

·        Agree a future deal offered by another party.  These deals are for set numbers of barrels at set prices for set delivery dates.  They will remain open until the specified expiry date.  If you want to accept the deal, hit the corresponding ‘OK’ button.

The trading screen provides you with information.

In the top left quadrant, there is a rolling graph.  This shows, for each day, the historical average daily temperature (shown in yellow dots) for that date, the oil price (blue bars) and the actual temperature (red bars).  The graph scale represents both degrees centigrade and dollars per barrel.

The price of oil is affected by the temperature and by events in the world.  News of what is happening in the world is relayed to you in the news feed (bottom right quadrant).

You are given information about your trading position.

Cash Balance.  You begin with $10m.  Cash changes hands at the date of delivery.

Oil in Storage.  You begin with 200,000 barrels.

Mark to Market Oil @ Spot.  This is the value of your oil in storage at today’s price.

Total Value.  Value of your cash and oil stocks.

Long/Short.  This refers to whether you have bought more than you have sold (long), or sold more than you have bought (short).  The agreed future deals are reflected in this figure, even though the oil has not yet been delivered.

Cumulative Daily Profit/(Loss).  This is a measure of your trading performance. It is based on the average price of barrels you have bought and sold, and of the barrels you have agreed to trade in the future, accumulated over the period.

Daily Profit/(loss).  As above, but on a daily basis.

Storage Cost.  It costs you a percentage of the value of your oil stocks to keep them in storage.

Interest Gain/(Loss).  If you have cash reserves you will gain interest.  If you are in debt you will pay interest.

Total fines.  The rule is that you should maintain oil in storage levels between zero and 2 million barrels.  If you do not, you will be fined.

ELGO Demand.  This part of the programme does not operate in the demonstration and can be ignored.

While the exercise takes the form of oil trading, it is not a full simulation.  There are differences from the complex world of trading (e.g. that your deals do not affect the market; that the prices of futures deals offered by others do not necessarily reflect a solid future price curve; that there is a fixed percentage ‘buy-sell spread’).

Click on the [OK] to go to the trading exercise.  Then click on the ‘START’ button to begin trading.

At the end of the session, there will be a report on your trading performance