Posted by racerick on 31st of Jan 2023 at 09:47 am
Trading Natgas - I've seen a lot of posts on here lately about
trading Natgas. I've been trading it for over 20 years mainly via
futures, occasionally with UNG and options.
I'd like to show you a few charts. As you can see, we're
entering one of the worse times of the year price wise. When you
look at the weekly chart you can see support at the 2.50ish level
and then down close to the $2 level. Should we maybe get a
bounce there. perhaps. But when you look at the monthly chart, it's
even worse. Here you can see the 2.50ish support, but then we're
looking at 1.59. Also notice on monthly, it can stay down there and
under 2.50 for months. So just be wary of catching a falling
knife.
Couple of thoughts. There is plenty of natural gas. We're
swimming in it as is Russia. A lot of the price action past year
has been more of a dislocation problem versus an actual shortage.
Worldwide gas is coming under political pressure and we all know
how long that can carry on. Last but not least, we've had
relatively mild winter worldwide.
Best way to trade. Of course the futures are going to give you
the most immediate results. However, that's probably not going to
line up with many peoples risk parameters. BOIL 's leverage and
time decay can be a problem. You need to be right or right out
fairly quick. UNG is the safest, plus you have opportunity to
generate some income with it via options, which BOIL has also. The
best opportunity that I see and what I'm doing besides future
contracts is buying call spreads on UNG. Because IV is low on it,
can get options relatively cheap. Wouldn't even entertain anything
less than the July expiration. For example based on closing prices
you can buy a July 21 $9 call for around $2 and sell a $14 against
it for approx. $1.30. What I think even better is the Jan 19
2024 $9 call only about .75 more for around $2.75 and you can sell
the $14 call against for a net difference of about 1.40, that's
almost a year out. I just picked a $5 spread to keep it simple.
Pick your own poison on that, but either would give you a 300%
percent return if you're correct on your long with relatively
little downside risk, that's at least a defined risk. Hope this
helps.
.
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Trading Natgas - I've seen
Posted by racerick on 31st of Jan 2023 at 09:47 am
Trading Natgas - I've seen a lot of posts on here lately about trading Natgas. I've been trading it for over 20 years mainly via futures, occasionally with UNG and options.
I'd like to show you a few charts. As you can see, we're entering one of the worse times of the year price wise. When you look at the weekly chart you can see support at the 2.50ish level and then down close to the $2 level. Should we maybe get a bounce there. perhaps. But when you look at the monthly chart, it's even worse. Here you can see the 2.50ish support, but then we're looking at 1.59. Also notice on monthly, it can stay down there and under 2.50 for months. So just be wary of catching a falling knife.
Couple of thoughts. There is plenty of natural gas. We're swimming in it as is Russia. A lot of the price action past year has been more of a dislocation problem versus an actual shortage. Worldwide gas is coming under political pressure and we all know how long that can carry on. Last but not least, we've had relatively mild winter worldwide.
Best way to trade. Of course the futures are going to give you the most immediate results. However, that's probably not going to line up with many peoples risk parameters. BOIL 's leverage and time decay can be a problem. You need to be right or right out fairly quick. UNG is the safest, plus you have opportunity to generate some income with it via options, which BOIL has also. The best opportunity that I see and what I'm doing besides future contracts is buying call spreads on UNG. Because IV is low on it, can get options relatively cheap. Wouldn't even entertain anything less than the July expiration. For example based on closing prices you can buy a July 21 $9 call for around $2 and sell a $14 against it for approx. $1.30. What I think even better is the Jan 19 2024 $9 call only about .75 more for around $2.75 and you can sell the $14 call against for a net difference of about 1.40, that's almost a year out. I just picked a $5 spread to keep it simple. Pick your own poison on that, but either would give you a 300% percent return if you're correct on your long with relatively little downside risk, that's at least a defined risk. Hope this helps.
.