Nat Spreads

U is expiring today, and trading -.39 to V, I just do not see it going out that wide; cash has been trading -.12 to -.05 for the last couple of weeks now and was at a nickel back this am. I cannot see cash starting out this weak; although the labor day weekend swap is trading roughly -.65 from V (which I like as a buy for you cash traders).

I have taken a position to go into end of day with, +U/-V at -.39.
 
Welcome back from vacation papa roach! I did a quick history check for the past 10 years on the H/J spread and it seems limited downside at this point (see attached). But it sure is hell scary looking at the chart! Is the action you are seeing now similar to any other year in your memory?
 

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Quote from SetDraw:

Welcome back from vacation papa roach! I did a quick history check for the past 10 years on the H/J spread and it seems limited downside at this point (see attached). But it sure is hell scary looking at the chart! Is the action you are seeing now similar to any other year in your memory?
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Yeah, the chart is scary looking, but this spread is a VERY fundamental storage play on not only absolute storage levels but also injection/withdrawal economics. I don't love the play I have on (+H/-J), but from a risk/reward standpoint and looking at storage economics, I like it at these levels as there really is no premium built in. I suppose you can say that is a contrarian play at this point.

IF we wind up with a warmer than normal winter, natty will go through the most painful period in history, likely see quite a few levered independents go titts up. At this point in the game, natty NEEDS a below normal winter.
 
Quote from PAPA ROACH:



IF we wind up with a warmer than normal winter, natty will go through the most painful period in history, likely see quite a few levered independents go titts up. At this point in the game, natty NEEDS a below normal winter.
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You mean below normal temperature yes?
 
Papa,

What's the reasoning for the H/J spread selling off/moving toward a contango as a cold winter play?

If it were a "cold winter" play wouldn't one look for the trend to the upside & not the downside

cold weather = demand. Hence, run up in spread toward backward?

J-law

PS thanks...
 
Sorry if this has been posted already but is there a shortage of storage for natural gas? If not the spread between the September and October contracts is massive. A lot of people buying September and selling October here?
 
speechless at the action. i keep on saying "how low can nat gas go" yet fail to go short! maybe a hedge fund is blowing up right now from nat gas?
 
Quote from SetDraw:

speechless at the action. i keep on saying "how low can nat gas go" yet fail to go short! maybe a hedge fund is blowing up right now from nat gas?
More...

Cash is trading at $2.00 for the balance of september, trading at $1.83 for the labor day weekend. October has even less demand and will have less available storage as well, I truly think oct futus will eventually trade sub $2 before expiry, hell maybe even $1.50.
 
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