Am option for natural gas price increase

Tom631 · Dec 8, 2013

Quote from opt789:

UNG is what you want for natural gas. As mentioned, commodity ETFs have some shortcomings, but UNG will basically track the futures. It has some 2014 months listed currently. The problem would be which strike you are buying and how much exposure. The risk with farther out options is vega as well as delta. UNG can go up over time but depending on your strike, what implied vol does, and how fast it moves, you may or may not make money on your option even though you were correct on direction.

Thank you !

Tom631 · Dec 8, 2013

Quote from xandman:

UNG had just popped above 6 mo. resistance. If he is really looking long term, he should just go with a nice dividend paying producer. CHK or XOM.

Ofc, thats my bias. I''ve never made money on options with long macro plays. Too much technical noise in between makes me impatient.

Thank you for suggesting those two.

oldnemesis · Dec 8, 2013

UNG:

http://finance.yahoo.com/q/bc?s=UNG+Basic+Chart&t=2y

Hypothesis: UNG will rise to 24+ by Jan '15

Trade:
with UNG at 20.17
Buy the Jan'15 20 call and sell the Jan '15 24 call for a net debit of $159

Price ...................P/L
15......................($159)
18......................($159)
20......................($159)
22......................$41
24......................$241
26......................$241
28......................$241

As people rush to take advantage of natural gas's cheap price it will eventually rise.

http://www.bizjournals.com/twincities/news/2013/12/06/supervalus-new-trucks-are-powered-by.html

But there is an awful lot of it and no telling when it will go up.

Tom631 · Dec 8, 2013

Quote from oldnemesis:

UNG:

http://finance.yahoo.com/q/bc?s=UNG+Basic+Chart&t=2y

Hypothesis: UNG will rise to 24+ by Jan '15

Trade:
with UNG at 20.17
Buy the Jan'15 20 call and sell the Jan '15 24 call for a net debit of $159

Price ...................P/L
15......................($159)
18......................($159)
20......................($159)
22......................$41
24......................$241
26......................$241
28......................$241

As people rush to take advantage of natural gas's cheap price it will eventually rise.

http://www.bizjournals.com/twincities/news/2013/12/06/supervalus-new-trucks-are-powered-by.html

But there is an awful lot of it and no telling when it will go up.

Excellent and much appreciated.
Thank you!

Maverick74 · Dec 9, 2013

Quote from Tom631:

Excellent and much appreciated.
Thank you!

Tom, I'm afraid what you are trying to do is much more complicated then it looks. Natty could rise substantially and your UNG won't go up a single penny. You really need to get into futures and study the forward curve. Natty has some seasonality quirks to it based on the summer and winter demand seasons vs the spring and fall supply gluts. The ETF does a terrible job managing this. I think you would be better off looking for stocks that will benefit from higher nat gas prices. CHK was mentioned. LNG is good one in lng space.

cdcaveman · Dec 9, 2013

Quote from Maverick74:

Tom, I'm afraid what you are trying to do is much more complicated then it looks. Natty could rise substantially and your UNG won't go up a single penny. You really need to get into futures and study the forward curve. Natty has some seasonality quirks to it based on the summer and winter demand seasons vs the spring and fall supply gluts. The ETF does a terrible job managing this. I think you would be better off looking for stocks that will benefit from higher nat gas prices. CHK was mentioned. LNG is good one in lng space.

I remember when i asked this exact question a long time ago when NG was just under 2 bucks.. I never did find an expression that made alot of sense to me...

justrading · Dec 9, 2013

Quote from cdcaveman:

I remember when i asked this exact question a long time ago when NG was just under
2 bucks.. I never did find an expression that made alot of sense to me...

Repeating myself, what exactly is the problem with trying to trade the swings? Why does it
have to be long term? Do you eat all three meals in one sitting daily?

cdcaveman · Dec 9, 2013

Quote from justrading:

Repeating myself, what exactly is the problem with trying to trade the swings? Why does it
have to be long term? Do you eat all three meals in one sitting daily?

haha.. true.. it has to have a very small notional value to make sense for me to trade.. that's not so easy.. plus i don't like day trading or anything close to that time frame..

justrading · Dec 9, 2013

Quote from cdcaveman:

haha.. true.. it has to have a very small notional value to make sense for me to trade.. that's not so easy.. plus i don't like day trading or anything close to that time frame..

I've been looking at NG, good number line. But everyone is seeing the problems with a 6 month position.

Will it go up over the next 2 weeks? What is the 5 day number line telling you? If it's good, can you make money over the next couple of weeks? Take that, then see what's next, and if NG is not as good as CL or a short on GC, move on.

This business about a 6 month time frame in trading is like asking if my marriage will last forever. They didn't.

cdcaveman · Dec 9, 2013

Quote from justrading:

I've been looking at NG, good number line. But everyone is seeing the problems with a 6 month position.

Will it go up over the next 2 weeks? What is the 5 day number line telling you? If it's good, can you make money over the next couple of weeks? Take that, then see what's next, and if NG is not as good as CL or a short on GC, move on.

This business about a 6 month time frame in trading is like asking if my marriage will last forever. They didn't.

haha i like the marriage analogy