Quote from jasonbraswell:
Okay, but you still don't know how convergence will take place. The futures could move up and HH gas could move up even more to catch up with it.
I mean, if you have some kind of study you've done showing a reliable statistical tendency in this relationship, I'm all ears, but if you're simply expecting futures to move down because HH spot is down right now, it's not a good bet.
Quote from scriabinop23:
i'm sorry, but fundamentals DO matter in the market.
the weather story is practically no different than last friday. I think this is amaranth short covering. notice every dip is getting bought... but there doesn't seem like momentum. you haven't seen one spike up in ANY of this buying. That means its very deliberate, and likely not too many stops are positioned to buy right now. The spikes down say everyone is positioned to sell this market.
it makes sense to attempt a short cover 10 days before expiration ... Gives them a little more time to unwind just in case the winter forecast actually changes. And furthermore, looking at all of those market inversions the last week -- huge selloffs, then instant buybacks -- makes sense...
Quote from ParisJOM:
Yes, fundamentals do matter alot in nat gas. Was I not clear on that when I mentioned colder weather and peaking inventories ?
I have also been following the COT data and it is giving me all the more reason to be long nat gas.
"Haven't seen a spike up" ? ..I know nat gas is volatile, but even in this market, yesterday's 15% jump is a "spike up" in my books.
You phrase "...not too many stops are positioned to buy right now. The spikes down say everyone is positioned to sell this market" is unclear..... for every transaction there is a buyer and a seller.
Quote from scriabinop23:
By spikes, I refer to instanteous movements - the type of thing you often see during report releases. Won't show up on a 1 month chart. Watch a 3 minute bar for what I'm referring to.
Yesterday's buying was gradual and systematic.
I think another build is expected ... so we're not at the end of the season.
Quote from ParisJOM:
Ok, we are obviously trading this thing farr differently. I don't bother zooming into the micro time frames ... too much noise for my longer term aproach.
Quote from scriabinop23:
here's some interesting COT info..
most recent weeks first on the graphs. notice the two reductions on spread counts. I assume they have quite a bit more open. 6 billion dollars loss divided by lets say 20k loss per spread is 200k potential contracts. This thing may unwind for a whole year, one month at a time.
Quote from ParisJOM:
Just some questions on the structures.
By some off chance, do you know how Amaranth's positions were structured ? futures, options, exchange traded or OTC contracts, a complex combination of all of the afforementioned ?
Concerning the unwinding of the spreads, would it not be plausible to assume that the unwinding of spreads would have a relatively neutral effect on the market as unwinding a spread involves both a sell and a buy order ? Also, if options were involved in these positions, it is near impossible to even begin to imagine if the unwinding would have any effect at all ... many options positions may be abandoned and therefore have no effect at all.
Just some food for thought
Quote from Neodude:
I think its false to think that the unwinding of spreads would have a neutral effect, because the buying and selling occurs in different contract months, so for example the near month would experience excessive buying and the far out month excessive selling or vice versa depending on the whether the spread position was a bullish or bearish one.
In regards to the options positions we don't know if they bought options or sold options (if sold the positions can't be abandoned). If they sold options the resulting covering would cause fluctuations in the underlying due to hedging by the market makers.
-Neo
Quote from ParisJOM:
Without knowing the structure of the positions we are left with only guesses as to which months are going to be impacted, and how.
An option can always be abandoned... whoever the buyer is.