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Real-Life Activities

Real-Life Decision Making

Taking risks is part of the job for power traders. Every day they are faced with the chance to lose or gain huge sums of money. They calculate risk based on potential gain or loss. But how do they decide what risks to take?

You are a power trader. You want to buy 500 megawatts of electricity on Monday. You call around and check the Internet for prices. The price turns out to be $60 in one market and $65 in another market.

The energy for sale at $65 a megawatt is from a source you've used before. You know the source is reliable. You will make less profit if you buy at $65, but you are certain it will make it to where you've promised your client.

The energy available for $60 has risk attached. It's coming from a source that is not always reliable. The energy might not make it to the power grid.

It's your call. What do you do?