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Trading the Supermodel Indicator

  • #21
  • Dec 17, 2007 12:51pm Dec 17, 2007 12:51pm
Carbon trading is supposed to be the next big thing. It's big in Europe already because of the Kyoto proticols which have not been adopted in the US. If they are, carbon trading will take off here too.
  • #22
  • Dec 17, 2007 12:53pm Dec 17, 2007 12:53pm
Quoting merlin
simply amazing.

it really shouldnt be that surprising how good of an indicator human reactions can be. afterall, it is humans behind every order. i guess the lesson to be learned here is that if everyone is predicting the same thing, its most likely not going to happen. now if i could only find a way to short global warming LOL.
Carbon trading-which means trading carbon credits that industry needs to buy. Part of the Kyoto protocol requires industry to pay with carbon credits when they pollute. They can sell those credits into a market if they pollute less. So traders speculate on the supply and demand for credits.
  • #23
  • Dec 18, 2007 11:39am Dec 18, 2007 11:39am
Quoting philmcgrew
We even traded emissions credits.
thanks for the insights phil. what kinds of emissions products do they have?? is this on an exchange, or an OTC market?
Relax and be happy.
  • #24
  • Dec 18, 2007 11:45am Dec 18, 2007 11:45am
Quoting NewstraderFX
Carbon trading is supposed to be the next big thing.
yeah i agree. until someone comes up with a silver bullet, these environmental products are going to gain huge popularity. i smell a trade idea... do a pairs trade...get long the exchange that is offering the most environmental products, and short the one with the least! CME seems to have a nice offering on weather, but i dont see any environmental stuff from them or the CBOE. looks like the NYMEX will offer it soon. where is this stuff traded??
Relax and be happy.
  • #25
  • Dec 18, 2007 12:35pm Dec 18, 2007 12:35pm
Quoting merlin
thanks for the insights phil. what kinds of emissions products do they have?? is this on an exchange, or an OTC market?
The two products that I know of are NOx and SOx (commonly referred to as acid rain). There is only so much pollution allowed and credits are given out based on generation capacities. Utilities which pollute less are allowed to sell their credits to those who pollute more. It was only a matter of time before buying and selling became commonplace. The platfrom we used was called ICE (Intercontinental Exchange). Trades were OTC.
  • #26
  • Dec 18, 2007 2:09pm Dec 18, 2007 2:09pm
I like that about you Merlin, Always thinking. I read somewhere that some of the smaller non-industrial countries will have credits available to sell; if I recall the credits are distributed to all countries, though I don't recall the criteria.
If the country selling has their currency tied to the dollar, i wonder if the buying country will need to buy dollars first. Could be something to keep an eye on.
In trading, there is no bullshit. You either make money or you don't.
  • #27
  • Dec 19, 2007 2:14am Dec 19, 2007 2:14am
Quoting mrgreen
I like that about you Merlin, Always thinking. I read somewhere that some of the smaller non-industrial countries will have credits available to sell; if I recall the credits are distributed to all countries, though I don't recall the criteria.
If the country selling has their currency tied to the dollar, i wonder if the buying country will need to buy dollars first. Could be something to keep an eye on.
Why the dollar? The only major carbon emissions trading is currently done in Europe, so you would have to buy EUR first. The US is not a Kyoto protocol signatory, and is the only nation in the world that has explicitly stated that it has no intention of ratifying the protocol. Having said that, however, the US is working on a similar idea, although the caps will not be set by Kyoto.

On a side note, the US has recently eased its opposition to the new plans drawn up in Bali, which would allow developing nations some extra emissions slack relative to "rich countries". Initially, the US thought this was unfair, but the delegates changed their minds at the last minute, despite having reservations about the plan.
  • #28
  • Dec 19, 2007 8:13am Dec 19, 2007 8:13am
Quoting fierceman
Why the dollar? The only major carbon emissions trading is currently done in Europe, so you would have to buy EUR first. The US is not a Kyoto protocol signatory, and is the only nation in the world that has explicitly stated that it has no intention of ratifying the protocol. Having said that, however, the US is working on a similar idea, although the caps will not be set by Kyoto.
The US EPA (Environmental Protection Agency) has been issuing credits for trade since 1993. The Chicago Climate Exchange was launched in 2003. The EU began trading in 2005.

The Kyoto Protocol was not ratified by the US at the urging of Nobel Peace Prize winner Al Gore. There have been numerous studies arguing that the Protocol was unfair and would be economically disastrous for some nations. The discrepancies between nations and their ability to comply is too numerous to list.
  • #29
  • Dec 19, 2007 8:30am Dec 19, 2007 8:30am
I don't really know much about carbon trading-I believe it's traded in Europe. As far as I know, areas that have agreed to the Kyoto protocols have to pay for emissions with carbon credits. Those that need more have to go on the open market to buy them and those that want to sell can do that also. So it's a traded market like any other.

I don't believe it will be traded in the US until and unless the US ratifies Kyoto.
  • #30
  • Dec 19, 2007 8:37am Dec 19, 2007 8:37am
Quoting NewstraderFX
I don't really know much about carbon trading.
You should have stopped after that sentence.
  • #31
  • Dec 19, 2007 8:42am Dec 19, 2007 8:42am
I was under the impression that the European scheme is much larger than anything in the States, which is why I said
Quoting fierceman
The only major carbon emissions trading is currently done in Europe.
Phil, do you have any volume numbers? That would be interesting to see.

Anyway, Kyoto is certainly far from perfect, but the economic argument against it is weak. The economic effect of climate change by far trumps any loss that Kyoto ratification would produce.
  • #32
  • Edited 7:14pm Dec 19, 2007 5:16pm | Edited 7:14pm
Quoting fierceman
I was under the impression that the European scheme is much larger than anything in the States, which is why I said

Phil, do you have any volume numbers? That would be interesting to see.

Anyway, Kyoto is certainly far from perfect, but the economic argument against it is weak. The economic effect of climate change by far trumps any loss that Kyoto ratification would produce.
No, I don't have numbers and don't have any access that the average bear wouldn't have. When I traded credits they were done OTC so the reporting is not necessarily transparent on those transactions.

As for weak economic argument there are a number of scientists that would argue that warming and cooling cycles have occured since the beginning and would consider the panic itself weak.
  • #33
  • Dec 19, 2007 6:40pm Dec 19, 2007 6:40pm
"Although Kyoto created a framework and a set of rules for a global carbon market, there are in practice several distinct schemes or markets in operation today, with varying degrees of linkages among them."

Also the treaty stands to expire in 2012 unless so further agreement can be obtained.
  • #34
  • Dec 22, 2007 3:19pm Dec 22, 2007 3:19pm
The following is an Internation Herald Tribune article By James Kanter


For the full article see: http://www.iht.com/articles/2007/06/...ness/money.php


Published: June 20, 2007
http://img.iht.com/images/dot_h.gif

LONDON: Seeking to match a desire to make money with his environmental instincts, Louis Redshaw, a former electricity trader, met with five top investment banks to propose trading carbon dioxide. Only one, Barclays Capital, was interested in his proposition.
Three years later, the situation has turned around entirely, and carbon experts like Redshaw, 34, are among the rising stars in the City of London financial district. Managing emissions is one of the fastest-growing segments in financial services, and companies are scrambling for talent. Their goal: a slice of a market now worth about $30 billion, but which could grow to $1 trillion within a decade.
"Carbon will be the world's biggest commodity market, and it could become the world's biggest market overall," said Redshaw, the head of environmental markets at Barclays Capital. But he said that in his current job, unlike some of his previous ones, including a stint as a British power trader at Enron, "I don't have to compromise on anything when I get out of bed in the morning."
  • #35
  • Dec 23, 2007 3:28am Dec 23, 2007 3:28am
The innovative minds now include Carbon trading into the market! Ingenious!

Perhaps next time, someone would include Population Trading as well, or Internet Online Hours Trading (how many hours do people stay online using the internet). The more bizzare might include Car Accidents Trading (how many die daily on vehicular accidents - car bombs included), Life Expectancy Trading (what age people die on the average).

  • #36
  • Dec 26, 2007 10:31pm Dec 26, 2007 10:31pm
Quoting BurgerKing
Perhaps next time, someone would include Population Trading as well, or Internet Online Hours Trading (how many hours do people stay online using the internet). The more bizzare might include Car Accidents Trading (how many die daily on vehicular accidents - car bombs included), Life Expectancy Trading (what age people die on the average)
the major reason that commodity markets are born is because of the need to hedge. for instance, the currency market exists because corporations, governments, etc, all need hedge their currency risk. the speculators (thats us!) are only the grease of the market, ensuring there is always someone there to take the other side of the hedgers trade. with this in mind, the suggestions you made arent all that crazy. major internet sites might want to short "Internet Online Hours" to hedge the risk of a slowdown in business, car insurance companies might want to get long "Car Accidents" to protect against more claims than expected, and term-life insurance sellers might go long "Life Expectancy" to offset the risk of people living longer
Relax and be happy.
  • #37
  • Dec 27, 2007 8:25am Dec 27, 2007 8:25am
we had a plant booming in Indonesia, some of us sold a $3 leaf (not flower) at $200 floating price.... and some years before, it was a golden time for lohan fish....
you can say that they sell trend... it just boom, and disappear as if nothing ever happened, same happen in every aspect of life
the happening boom in Indonesia : buying Dinar
wanna ride?
  • #38
  • Dec 27, 2007 10:40am Dec 27, 2007 10:40am
Quoting merlin
the major reason that commodity markets are born is because of the need to hedge. for instance, the currency market exists because corporations, governments, etc, all need hedge their currency risk. the speculators (thats us!) are only the grease of the market, ensuring there is always someone there to take the other side of the hedgers trade. with this in mind, the suggestions you made arent all that crazy. major internet sites might want to short "Internet Online Hours" to hedge the risk of a slowdown in business, car insurance companies might want to get long "Car Accidents" to protect against more claims than expected, and term-life insurance sellers might go long "Life Expectancy" to offset the risk of people living longer
There's a financial derivitive for everything it seems.
  • #39
  • Dec 27, 2007 11:16am Dec 27, 2007 11:16am
Quoting NewstraderFX
But he said that in his current job, unlike some of his previous ones, including a stint as a British power trader at Enron, "I don't have to compromise on anything when I get out of bed in the morning."
this line doesn't impose me too much trust...
Let me guess, they will call power stations to turn ON their pollution mode, so they can make millions. The same trick enron pulled with energy lines in california, if i'm right?

Again, In the future I what to extend my learning in economic, not in geography or physics to be able to tell where pollution clouds will go
"Abandon all hope, you who enter here" La Divina Commedia, Dante Alighieri
  • #40
  • Dec 27, 2007 11:32am Dec 27, 2007 11:32am
Quoting semar
this line doesn't impose me too much trust...
Let me guess, they will call power stations to turn ON their pollution mode, so they can make millions. The same trick enron pulled with energy lines in california, if i'm right?

Again, In the future I what to extend my learning in economic, not in geography or physics to be able to tell where pollution clouds will go
I suspect that he was referring to the less than honorable trading practices that he engaged in as a trader at Enron. Having worked in the control room of power plants for 12 years I can promise you that there is no "pollution" button. Emmissions are monitored by a 3rd party to enure that the pollution credit market remains trustworthy.

Pollution goes where the wind takes it. In the US, air generally travels west to east and pollution stays airborne for 500-1000 miles.
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