As a consequence of competition in electricity markets, a wide variety of financial derivatives have emerged to allow market agents to hedge against risks.Electricity options and forward contracts constitute adequateinstruments to manage the financial risks pertainingto price volatility or unexpected unit failures faced bypower producers. A multi-stage stochastic model is described in this tutorial paper to determine the optimal forward and option contracting decisions for a risk-aversepower producer. The key features of electricity options toreduce both price and availability risks are illustrated byusing two examples.