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Present power markets are designed for trading conventional generation. For wind generation to participate in a short-term energy market, lengthy wind power production forecasts are required. Although wind speed forecasting techniques are constantly improving, wind speed forecasts are never perfect, and resulting wind power forecast errors imply imbalance costs for wind farm owners. In this paper, a new method for minimization of imbalance costs is developed. Stochastic programming is used to generate optimal wind power production bids for a short-term power market. A Wind power forecast error is represented as a stochastic process. The imbalance costs resulting from this strategy are then compared to the case when wind power production bids on a short-term power market are based directly on a wind speed forecast. Index Terms--Forecasting, optimization, power market, stochastic process, stochastic programming, wind power generation.