EBF 301
Global Finance for the Earth, Energy, and Materials Industries

Lesson 3 Activities

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Pricing Activity

The NYMEX is actually owned by the Chicago Mercantile Exchange (CME Group). Links to their energy commodity prices (Henry Hub Natural Gas Futures and Light Sweet Crude Oil (WTI)) can be found in the course "Resources" menu on this website and the Lesson 3 Module of Canvas. (I added these links to Canvas as well so all of the information for the assignment is in one place. We can keep it in the resources menu as well.) Using those links, look-up the prices for both crude oil and natural gas futures for delivery in the closest month to the present time. Although you won't see this terminology on the NYMEX website, the futures contract for delivery in the closest month to the present calendar month is called the "front month" contract. Report the "Last," "Change," and "Prior" prices, and also report the volumes for both the crude oil and natural gas front month contracts. Please include a screenshot of the NYMEX website that you used for crude oil and a screenshot of the NYMEX website you used for natural gas. The answers should be uploaded to the L3 Activity dropbox in Canvas as a word document or PDF.

"Trading Places" Video Clip Activity

We need to move this activity in Canvas

Watch the 12-minute video clip located in the Lesson 3 module in Canvas and answer the questions posed below.

This movie was released in 1980. Although it is old, it still does a great job of illustrating what goes on in the "pits" of commodity exchanges. In this movie, the Duke brothers are rich commodity brokers. Dan Akroyd works for them and Eddie Murphy is a street bum. The brothers have a bet about one's genetics or their environment shaping their future. To test their theories, they ruin Akroyd's life and put Murphy in his place. When Eddie (William) discovers the bet he tells Akroyd and they plan to ruin the Dukes. They manage to find out that the Dukes are getting the Department of Agriculture's report on the orange crop before it is released to the public. Akroyd and Murphy steal the report from the Duke's man and replace it with a false one. The two then go to the NYMEX and out-trade the Dukes. The Dukes think their report, when released, will show crop damage and that will make FCOJ futures rise.

Several concepts of futures trading can be learned from this one clip..." going long", "going short", fundamental information (the crop report), "Locals" (the traders who jump into the action started by the Dukes), and margin calls. You can also see the prices posted as the trades occur... "Open", "Last", etc.

Answer the following questions about the video. The answers should be uploaded to the L# Activity dropbox in Canvas as a word document or PDF.

  1. What position did the "Dukes" take and why?
  2. How did they go about this?
  3. What position did Dan Akroyd and Eddie  Murphy take and why?
  4. How did they go about this?
  5. What was the financial downfall of the Dukes?
  6. What fundamental information was important to the Traders?

Grading Criteria

This activity is due at 11:59 pm on Sunday and is worth up to 20 points on the EBF 301 grading scale. 

Fundamental Factors Activity

Part of the overall objective of this course is to have you understand how the market functions in terms of determining price and how it trades in general. To truly appreciate this, you have to begin to think like an energy commodities Trader. to do so, you must consider the market factors that they research before making any Buy/Sell decisions.

In Lesson 2, you were presented with a number of “fundamental” factors that can influence the price of crude oil and/or natural gas.

Beginning this week and continuing until further notice, you will submit Fundamental Factors assignments in the respective Lesson in Canvas each week by 11:59 p.m., Eastern US Time, on Sundays. Instructions for the Fundamental Factors assignments can be found under the "Resources" section of this website. (consider either adding to Canvas)

You are to submit ALL of the same fundamental factors for both crude and natural gas shown in Lesson 2 and give your opinion on how they impact prices for oil and natural gas. Fundamental Factors assignments should be submitted to the Fundamental Factors Dropbox on Canvas for each week.

Grading Criteria

A detailed grading rubric for the Fundamental Factors activities is available under the "Resources" section of this website.

An example of a complete answer would be:

Natural Gas

The Energy Information Agency’s Weekly Natural Gas Storage Report (http://ir.eia.gov/ngs/ngs.html) showed an injection of +50 Bcf. This was below the expectation of +60 Bcf, therefore, it was seen as “bullish” since less supply was put into storage implying that demand was higher than expected. Prices would increase under this scenario. Total gas in storage now stands at 1.5 Tcf which is below the 5-year average as well as, last year at this time.

Submitting Your Work

Pricing Activity: Submit your findings as a single word document or PDF to the L3 Activity Dropbox in Canvas.

Fundamental Factors: Submit your work as a single word document or PDF to the Lesson 3 Fundamental Factors Dropbox in Canvas.