OI24: Why Power Trading Is 10 Times Crazier Than Crypto ft. Cory Paddock

Cory Paddock (0:01)

And that scenario happens a lot in trading, and as one gets more experienced, the ability to just recognize those days and recognize, you know what, today is not the day, today is not the day to fight for this loser, for this losing position. There's more trading days ahead.

Let's move past this one and go on to the next.

SPEAKER_2 (0:25)

Welcome to Top Traders Unplugged. In markets, success doesn't come from predicting what happens next. It comes from being prepared for what you can't predict.

In each episode, we go deep with some of the world's most thoughtful minds in investing, economics and beyond, to understand how they think, how they prepare and how they decide, and the experiences that shaped how they see the world. No noise, no shortcuts, just real conversations to help you think better and invest with confidence.

Moritz Seibert (1:03)

Hello, and welcome to another episode of the Open Interest Series on Top Traders Unplugged. This is episode number 24, and I'm your host, Moritz Seibert. So today's episode is a little different. For the first time, I'll be speaking to a prop trading firm rather than a hedge fund or investment manager running external client money. Specifically, I'll be chatting with Cory Paddock, one of the two founders of GBE Energy, a power trading business based in Calgary and White Rock in Canada. GBE, which by the way stands for God Bless Everyone, was founded in 2013 and trades US power markets with a particular focus on PJM, the large electricity market covering 13 US states. The team combines traders, meteorologists, quantitative developers, and market analysts all working to identify opportunities and power prices across different locations and time periods. Before we start, I want to give you some background on why I wanted to record an episode with GBE. Firstly, although power markets are very niche, they are opaque and they don't have as many market participants as for example the US equity markets have.

I personally find them super interesting. I mean, unlike equities and bonds and futures, power markets sit at the intersection of physics, weather, economics, and market design. And understanding these dynamics better than other market participants is how GBE makes money.

Moreover, electricity is central to all of our everyday lives, the functioning of societies, our economies, the energy transition, the increasing popularity of UVs, and more recently, the massive growth of AI data centers. We are going to need a lot more electricity in the future, and that is already having a major impact on power markets and prices. Secondly, and this is the other part of the GBE story that I found particularly interesting, and that has to do with how they recruit and develop traders. The firm has developed quite a bit in how they built their trading teams. In the early years, they mainly recruited experienced traders and gave them the capital, technology, and infrastructure to run their own books, but more recently, they've shifted towards finding young and hungry people with the potential to become great traders and then developing them internally.

So the philosophy behind all of this is that trading is a high-performance discipline. Analytical ability is important, but so are probabilistic thinking, conviction, emotional composure, resilience, and the ability to learn from your results without being fooled by them. Okay, so that's a lot, but before we really get into the deepweeds, here are a few fun facts and quick facts about Cory. He's got an MBA from the University of Calgary, started his career at TransAlto, a Calgary-based utility and wholesale power marketing company. He then moved to a power trading hedge fund in Houston before starting GBE in 2013 He is, I find that very interesting, a lifelong athlete who played professional volleyball in my home country's Germany's 2nd Bundesliga. And he has run a marathon in under 2 hours and 55 minutes. Boy, that is quick.

That has been the longest ever introduction I've made, Cory. Probably a little bit scared because this is about electricity and not a lot of people really know the power markets that much or that well, but you do. At any rate, welcome to Open Interest. It's great to have you on.

Cory Paddock (4:31)

Thank you for having me. Yeah, that was quite an intro.

Moritz Seibert (4:34)

Well, there we go. Well, let's get going. I mean, go from simple maybe to more complex.

If you don't mind, could you give us like a 30,000 foot overview of how the cost of power have developed, how the US electricity markets work, like just something simple to get started? What are we talking about?

Cory Paddock (4:56)

Oh my, that's quite a substantial question.