About NorWatt > Trading Strategies

The NorWatt-team has developed many different strategies with the purpose to optimize its risk exposure. The strategies are dynamically adapted to the momentum and direction of the market, based on extensive technical and/or fundamental analysis. The analysis are purchased from leading providers of power analysis and completed with in-house analysis and models. Positioning size is seen in context with volatility in the market and desirable risk exposure.

NorWatt uses the following main strategies:

Trend Strategy

The power market is typically having long trend periods with large price movements. The reason for this is that the Nordic power market is dominated by hydropower and thereby sensitive to trends of weather systems, but in periods with less dominant weather changes, the market can follow trends based on oil, coal, gas, CO2 or other markets. The NorWatt-team has succeeded well in identifying such trends with consequently long term positioning to follow. This strategy has given the best profit over time. Trend strategies have a long-term perspective.

Fundamental strategy

NorWatt spend considerable resources on fundamental analysis based on quantitative models of future price development. In some periods it is a deviation between forward prices and prices predicted by the analysts, and the NorWatt-team has good results from long-term positioning based on such fundamental miscalculations in the market.

Spread strategy

There are many potential spread-strategies. One is based on fundamental analysis pointing out that the price difference between two contracts might be incorrect. For instance the first quarter in a year might be overpriced related to the second quarter of the same year, and this opens for a short position in the first contract and an equally sized long position in the second contract. Experience show that there is high probability that the «price miscalculation» are of temporary character. Spread strategies like this normally have a very long-term perspective, thus the usage is limited.