Imperial Alpha makes history in crude oil trading competition
Imperial Alpha, a team of five consisting of members from the Energy Society, won 3rd place in the ESCP Energy Trading Competition 2019. This year, over 40 teams participated in the competition, including a total of seven teams from Imperial College. Imperial Alpha, described by the competition director as the “team with a consistently strong performance”, finished four trading sessions with 170 points, only seven points less than first place, and with a profit of $45million. This was the best result achieved by an Imperial team to date.
The team consisted of and was captained by Yu (Ronnie) Zhang, a PhD working on energy transportation optimisation, Adam Isenberg (Business School), Bob Xu (Materials PhD), Ernesto Ignacio (ESE PhD) and Gianpiero Placidi (Chemistry UG).
The trading competition uses a fundamental-driven crude oil futures market, carried through a web-based trading simulator developed by ESCP Business School. Four products formed the basis of the market: WTI, Brent, Heating Oil and Gasoil, and various spreads were employed to limit outright exposure. In practice, most teams used a combination of geographic and time.
Imperial Alpha was first formed two months prior to the competition, during which the team carried out extensive studies into the crude market fundamentals, as well as trading exercises through online platforms. Nonetheless, many concepts were new to the team until met in practice. Fortunately, the team managed to adapt quickly from the beginning, and employed a strategy that involved small trading in the opening hours to minimise losses, followed by maxing out on limits when more confident on the market direction.
To begin with, the team used a classic trading house model, where the US and European market were covered by two teams of two, with a risk manager overlooking the overall position and exposure. This freedom in opinions allowed the team to benefit from the greatest diversity in the market, and eventually brought significant profits into the account.
The competition was divided into two days; after the first few quiet hours of learning and adaptation to the trading platform, most teams soon became more active and the rooms adopted a trading-floor-like atmosphere. Most of the shouting and cheering happened on the second day when a Russian plane caused unnecessary tension between Russia and the UK. The market reacted most violently at the beginning, creating large volatility as the news developed. Huge profits and losses were generated across the floor, and the air reached a critical point when Russia suddenly opted out of the negotiation. Later, the European oil price gradually lost momentum as tensions softened via German intervention, resulting in bearish trading activity. The competition finished with a sudden announcement from OPEC, claiming to cut supply across all member countries. Overall, Imperial Alpha managed to produce a strong performance out of the turmoil and profited in all four trading sessions thanks to solid analysis and teamwork.
Looking back, the competition offered an unparalleled opportunity to learn and compete in energy trading. The trading platform was professionally designed, and the market response was indeed close to reality. At the same time, it was a great pleasure to meet and interact with students from a wide variety of backgrounds.
With this positive experience now under our belts, we believe future Imperial teams will have an even better chance to win the ESCP energy trading competition in 2020. All members of Imperial Alpha would like to take this opportunity to thank the Energy Society for the support during and before the competition.
For the full results of the ESCP Energy Trading Challenge 2019, please follow the link below:
