Long term investment of Natural Gas

[Handle123]

Nat Gas bottom was August 2019, very nice H&S weekly middle of October, Nov 5 shows daily triple at 2.90 area/, waiting for deep retracement to add to longs/hedged.

Considering buying EFT's long on funds seems not using account to one's advantage whereas future's, at least to me. Now granted most markets in futures can gap or go limit, so best to fully understand markets you want to trade to last 20 years on historicals, and ETF's gap as well.

One way to trade are Spreads as below long NG Jan20/ short NG Jan21, margins smaller and still good kick for profits.

 

[qwerty11]

Time for some Mythbusting:
There is a big myth about leveraged ETFs that has been recently propagated in the media. This article corrects the myth and explains the faulty reasoning that gave rise to it.

The myth is:

Leveraged ETFs are not suitable for long term buy and hold
These claims are not backed up with mathematics and data. This article rectifies that deficiency and finds that the claims are false.

http://ddnum.com/articles/leveragedETFs.php

That's only true for broad (stock) indexes. Not for commodity ETFs. And NG is the most volatile of them all.

 

[qwerty11]

What is the best vehicle for long term investment of natural gas? Futures have roll-over cost and ETF is reset daily and not accurately following actual performance as far as I know. Please share your experience. I think I can safely buy whenever price drops to near $2 with stop loss below $1. Because it has production cost, it actually cannot go down that deep I believe. Looking back history, price recovery is relatively quick.....
Thanks!

1) do as told in the second post (long LT future)

2) short an inverse natgas ETF

 

[Wheezooo]

That's only true for broad (stock) indexes. Not for commodity ETFs. And NG is the most volatile of them all.

Ya mean like in 2002-2003, when Enron went down, and all energy stocks went near 0.

 

[Wheezooo]

Depending how long is long there just wasn't any volume there last I checked (I was trying to go out 10 years with exposure every year). I agree with @bone, and would add that you might want to look at the MLPs with gas exposure.

It's pure, it's simple, it's clean, it answers the question at 100% correlation.

No need to go 10 years out, once you pass the contango/backwardation noise, say about 3-5 years out, there is no difference between 5 and 10 years. It's safe to treat one as the other, you'll only have interest rate risk on those spreads.

It should be 'much' deeper than you see. I'd calculate the fair value, bid/offer giving up a slight edge, let a term market maker lean on me, and fill me when he finds something better to spread against it. Those spreads shouldn't be more than 2 cents wide OTC.

 

[Sig]

It's pure, it's simple, it's clean, it answers the question at 100% correlation.

No need to go 10 years out, once you pass the contango/backwardation noise, say about 3-5 years out, there is no difference between 5 and 10 years. It's safe to treat one as the other, you'll only have interest rate risk on those spreads.

It should be 'much' deeper than you see. I'd calculate the fair value, bid/offer giving up a slight edge, let a term market maker lean on me, and fill me when he finds something better to spread against it. Those spreads shouldn't be more than 2 cents wide OTC.

I was looking to hedge actual exposure to gas rates for a generation project I was working on that would actually consume gas every year for 10 years. So I'm some cases, yes it matters what price you can hedge for 2029 if you have actual 2029 exposure! But certainly, if you are just trading then the difference between years probably falls off exponentially at some point.

 

[Wheezooo]

I was looking to hedge actual exposure to gas rates for a generation project I was working on that would actually consume gas every year for 10 years. So I'm some cases, yes it matters what price you can hedge for 2029 if you have actual 2029 exposure! But certainly, if you are just trading then the difference between years probably falls off exponentially at some point.

As I said:
1- surprised you can't find a 10 yr monthly strip.
2- hedging 2029 with 2029 will of course be the best hedge. You implied that was between, unavailable and difficult to procure.
3- it makes no difference 'trading' or against generation. A hedge is a hedge. And say 25 is the best you can find. The spread between that and 29 ain't moving a penny. It works as a 'near' perfect hedge for your purposes, and gives you insane time to roll it back slowly.

 

[Wheezooo]

I was looking to hedge actual exposure to gas rates for a generation project I was working on that would actually consume gas every year for 10 years. So I'm some cases, yes it matters what price you can hedge for 2029 if you have actual 2029 exposure! But certainly, if you are just trading then the difference between years probably falls off exponentially at some point.

Just curious, by generation, do you mean gas gen or electric gen with gas.?

 

[Sig]

Just curious, by generation, do you mean gas gen or electric gen with gas.?

Combined heat and power using gas to generate electricity and hot water.

 

[Wheezooo]

using gas to generate electricity.

If my simplification of what you said is correct. I gotta ask:

Are you planing on simultaneously contracting/selling forward your electrical generation when buying in your gas exposure?