Every trade has a signed quantity: positive for buys, negative for sells.
A position is the sum of signed quantities for the same commodity, delivery period, and book. If you buy 500 MWh and sell 300 MWh, your net position is +200 MWh (long).
Delta exposure is the net position across all books. It tells you how much price risk you carry.
Hedge coverage measures how much of your physical position is offset by hedge trades.
Formula: |Hedge Position| / |Physical Position| x 100%
75% coverage means three-quarters of your price exposure is hedged. The remaining 25% is your delta exposure.
Mark-to-market (MTM) P&L values your position against the current forward curve.
Formula: (Market Price - Trade Price) x Signed Quantity
If you bought at 25 and the market is now 27, each MWh is worth +2. If you sold at 25 and the market rose to 27, each MWh costs you -2.
The key insight: short positions (sells) profit when prices fall, and lose when prices rise.
A forward curve shows the market price for each future delivery period.
Contango: later months are more expensive (upward slope). Common when storage/carry costs dominate.
Backwardation: later months are cheaper (downward slope). Common with seasonal demand patterns.
The curve is the benchmark for valuing all your positions. Without it, you cannot calculate MTM P&L.