Avoid speculation

Trading strategy

It is straightforward to meet your obligations under the EU ETS. But the challenge is to comply without taking undue risk and at as low a cost as possible.

Developing a proper compliance and trading strategy means understanding how changes in carbon prices affect your business and profitability; it requires determining your attitude to risk; and it means having a clear view of how and when you can finance your purchases.

It’s a serious exercise but it is vital for your risk management.  We’ll help you go through the steps so that you have a rigorous approach which makes sense for your business.

Avoid speculation

A key goal for most of our clients is to avoid speculation. Speculation is usually defined as buying or selling stocks or commodities to profit from an anticipated price movement. Most companies in the EU ETS don’t want to speculate, as it is not their business.

We believe that speculation is when a company has a position in the EU ETS. This means that they either profit or lose from the price of EUAs going up or down, respectively.

So the goal of most industrial companies is to have a neutral position in the EU ETS, i.e. to make sure that the price change of carbon does not impact them. This is why they hedge, i.e. make sure that as soon as they get a natural long or short position, they immediately sell or buy units, to return to a neutral position. The art is figuring out when you actually have a position.

Our view is quite simple - if you do nothing, you are speculating. Please call us to discuss your particular circumstances.

 

vertis blog


The European Parliament’s post-2020 reform package explained
20 February 2017
On 15 February, the European Parliament adopted its position on the Phase 4 reform of the EU ETS. The report was adopted...
Bring it in – Price forecast competition 2017
16 January 2017
Last January we invited our clients receiving the Daily Newsletter to do the impossible and guess the highest settlement...

trading room


EUA Dec17: Bears lining up in view of several risk factors
27 March 2017
Last Friday's sell off pushed the price of the EUA Dec17 to a new two-month low. After seven consecutive sessions in neutral...
EUA Dec17: Consolidation around the 200-day moving average
20 March 2017
The benchmark carbon contract moved in a narrow range between 5.09 and 5.25 euro last week, but could not get away from...
EUA Dec17: Four black candles pushed price back to 5 euro
13 March 2017
The benchmark carbon contract produced four black candles last week and the last, white candle is also very tiny. The price...

the bustard blog