Hedging with base load futures tutorial

The electricity spot price is inherently volatile and can leave businesses exposed to unexpectedly high prices. Businesses retain full responsibility for making decisions on their level of exposure to spot prices, and for managing that exposure on an ongoing basis. Hedging electricity purchases by investing in electricity futures contracts via the ASX is an effective way to mitigate spot price risk, but hedging also introduces its own set of risks that should be understood and managed. Purchasers of electricity on the spot market should fully understand their adopted risk management approach, as well as the risk of not hedging.

This data is designed to demonstrate the hedging of electricity purchases with base load futures contracts. It provides a risk-free platform to understand trading in hedges. The interactive charts below provide three illustrative load profiles to show how the type of load to satisfy may affect the amount of futures contracts to purchase.

For an illustration of more strategic hedging view our illustrative hedging strategies.

While this data is real, and every effort has been taken to ensure its accuracy, it should not be relied on for financial advice.