Abstract: Under the assumption of Cournot competition in the electricity spot ma rket, the equilibrium problem is addressed for spot market competition of genera tors with a certain amount of sales of financial call options. A solution to the equilibrium problem is developed according to relationships between the spot pr ice and the strike price of the call options. A numerical example based on Monte Carlo simulation, in which demand uncertainty is taken into account, is present ed to show the impacts of call option trading on the market as a whole. It is de monstrated that the call option can play similar roles to the forward contract t o mitigate generators' market power abuses when the spot prices are relatively h igh. In addition, when the spot prices are relatively low, the call option is mo re helpful to reduce generators' profits and increase consumers' benefit due to its flexibility as compared to the forward contract.

Key words: Cournot competition, equilibrium analysis
, financial call options, market power, electricity market