Quote from SethArb:
I think I made my first QG trades tonight in asian trading
was lucky to break even ... was trying to scale in longs against shorts in QM
since I am not one of the locals on the NYMEX floor or
too knowledgeable about the historical correlationship
between these two energy product .. .I will try not to play
QG in the future ...
good luck to all you gun slingers !
QG has its own little story - spot to future price interplay, strong momentum in trading (get out of the way until trends define), a tendency to overshoot, etc.
I traded tonight as well, long avg 6.565. i think this dumping overshot - i'm expecting things to stabilize at least around 6.75.
while I don't expect it, I wouldn't be surprised to see nat gas hit 6.25 as well. I can only theorize nat gas is so volatile because leverage on these contracts is so large, and traders have let technicals reign supreme. So when its time to dump, every one who knows what they're doing dumps. Vice versa true. Even on the mini, its a lot to lose for a few cents here or there.
cash prices are too strong right now, and there will likely be more tropical depressions, etc. etc. so I think there is some additional support.
Yes, you could play the spread between QM and QG, but I don't really think that is a realistic -short term- trade, especially right now. And any long term trade with QG takes balls, or at least a really great entry price, I think. There's a reason QG is not 6:1 ($12) to oil right now, because QG has its own supply/demand dynamics. The only way that ratio will hold true is prices are stable with oil long enough to justify actual consumption changes to make NG look more attractive - again, a long term trade. I think any short term play on this modality of thought is wishful and arrogant (to presume you know better than the market).
