Nat Spreads

PAPA ROACH · May 28, 2009

Quote from JPope:

Sorry to go through this clarification again, but you bought N/ Sold Z on this one, correct?

Also, how you feeling about the V/X these days? Seems like it's running into some resistance in the -.7 range.
Thanks again for your contributions

Correct, I bot N/sold Z.

I took profit this morning on the V/X at .697, it may come back in a bit, once again giving opportunity to wear it again.

handle_this · May 29, 2009

Quote from PAPA ROACH:

Very good question, I hope I can give a good answer.

I have been trading natty futures since 1996, and physical since 2000. I can tell you one thing for certain, natty is unlike most other trading vehicles in the dynamics it has. Trading outright directional can run you over faster than anything out there. It can be done, but you really need deep pockets.

I have been succesful for a long time, unfortunately the owner of the company I work for is not very fond of speculative NYMEX trading and has rules that make directional trading quite difficult, like handicapping me. I still do a little here and there, but I can trade spreads without the handicapping from the boss, so that is what I spend my time on.

The beauty about spreads is if you understand the physical market, you can do very well with them, regardless of market direction. Spreads are much more fundamental in nature than outright futures.

I do use CQG, more traders use TT (Trading Technologies), but for what we do, CQG is cheaper and does just fine. The spread symbology is NGE (for natty globex) and then S (for spread) and then how many months out from the first month of your spread, and then the first spread month/year. Example- June/July 2009 is NGES1M9. The June/December would be NGES6M9, since Dec is 6 months past June.

Also, whatever you are doing with the front month of your spread is what you are doing on the buy/sell, which is different than what I talk about here as I still use floor trading lingo.

Thanks- any thoughts on Oct9 jan 10 ? buy 1.70 I think.... hurricanes etc ?

PAPA ROACH · May 29, 2009

Quote from PAPA ROACH:

I sold N/Z at 1.804, should come in quite a bit on a market rally led by the UNG fools.

I closed out at 1.771 for a .033 profit.

I am rethinking my bullish early month/bearish last part now with this action today, it just doesn't look good for the bulls. I am flattening out and will re-assess next week.

PAPA ROACH · May 29, 2009

Quote from handle_this:

Thanks- any thoughts on Oct9 jan 10 ? buy 1.70 I think.... hurricanes etc ?

I have no opinion at the moment, I just flattened out my positions on todays weak-ass action.

handle_this · May 30, 2009

Quote from PAPA ROACH:

I have no opinion at the moment, I just flattened out my positions on todays weak-ass action.

Interesting action I suppose, looks like the market wants it to go down with the sell off late in day, but I think CL at 70 soon and July being a bottoming month for NG- I think we will see 4+00 remander of summer, nobody really likes to sell the p@$ out of it( speaking of large funs in Houston in my opinion, you know who) going into hurricanes and all the uncertainty with CL and dollar.

If your a bear- spreads are only way to play, flat price will drive you crazy from short angle- it might go lower, but it will rally 30+ cents first !

long

PAPA ROACH · May 31, 2009

You may be right, but the action I saw on ICE Friday made me close out of my bull spreads. It looked to me like fund accumulation of shorts, whacking the bid in waves. Enough to drive the price down even with the huge UNG volumes getting pumped. This makes me rethink as when I usually see this action, it is very indicative of a larger move down immenently.

As far as oil prices are concerned, I would loosely follow that at this point, there is no available fuel switching, gas is and has been cheaper for some time; all switching has taken place a long time back. Also to note is nuke refueling is over and we are quickly ramping back up, offsetting gas fired demand. Nukes are up like 10% in the last week and a half. Also, LNG volumes picked up last week, we had been down some due to a few issues (not price related).

I will watch the ICE action again tomorrow before I decide whether to put on bear spreads, if it is similiar to Friday, we're going down.

handle_this · Jun 1, 2009

Quote from PAPA ROACH:

You may be right, but the action I saw on ICE Friday made me close out of my bull spreads. It looked to me like fund accumulation of shorts, whacking the bid in waves. Enough to drive the price down even with the huge UNG volumes getting pumped. This makes me rethink as when I usually see this action, it is very indicative of a larger move down immenently.

As far as oil prices are concerned, I would loosely follow that at this point, there is no available fuel switching, gas is and has been cheaper for some time; all switching has taken place a long time back. Also to note is nuke refueling is over and we are quickly ramping back up, offsetting gas fired demand. Nukes are up like 10% in the last week and a half. Also, LNG volumes picked up last week, we had been down some due to a few issues (not price related).

I will watch the ICE action again tomorrow before I decide whether to put on bear spreads, if it is similiar to Friday, we're going down.

I agree on everything you point out- I think its simple inflation. Nat Gas and CL should not be here except for the dollar story..... demand is way off YR/YR too

PAPA ROACH · Jun 1, 2009

Layering in to -V/+X here (.635). I have watched ICE action once again, showing someone accumulating a large short position on the stealth, similiar to Friday, just less volume and agression. Also the UNG volume on the day thusfar is quite muted up here. I now lean to the downside and like accumulating bear spreads. Will rethink if we close out strong (over the 4.12-4.15 area today).

texrex2002 · Jun 1, 2009

Quote from PAPA ROACH:

Layering in to -V/+X here (.635). I have watched ICE action once again, showing someone accumulating a large short position on the stealth, similiar to Friday, just less volume and agression. Also the UNG volume on the day thusfar is quite muted up here. I now lean to the downside and like accumulating bear spreads. Will rethink if we close out strong (over the 4.12-4.15 area today).

Just to be sure I know what you're talking about: -v/+x means you're selling October (4.629) and buying November (5.254)? You're .625/MMBTu (or $6250) out of pocket for every pair of contracts you have on.

So you're anticipating that the v/x spread will widen as we get closer??? Otherwise it's a loser...

I'm just using the prices from the Nymex page.

Rtrader2525 · Jun 1, 2009

I can't speak totally for Roach, but yes he is bearspread so he is anticipating the contango strengthening. He isn't out $6250 a spread though, that is just the difference.