Natural Gas - Help

M

markcuban

Hey -

I am looking to put on a position in natural gas with a long time horizon. I have an I/B account. The futures only go out 2 months - i guess as those are the only ones electronically traded.

My question is - how do you roll the contracts and how much does it cost? I don't really understand. If I pick up a miny march contract for 7.30 per million btu's *2500 =18k or whatever - what happens to my 18 k when it expires???? How do you asess the risk? Any insight would be helpful. I am looking to hold it for a few years - is this possible through rolling?

Thanks

Mark
 
i read that one too - but it don't answer my question re rolling contracts and costs to roll and how to roll and how to assess risk.

its not on nymex or i/b or elite..... i checked

do you know the answer?

thanks
 
When you roll over

In Interactive broker, a window will pop up (right after or before the end of the contract 1 or 2 days) and ask you

"Do you want to roll over these contracts ..."

You just checkbox them and its rolled over,


No rolling manually, or redirecting the 20 ton natural gas truck that arrived at your front door back to cme.
 
I think the original poster is asking about the actual mechanics and dollars and cents of rolling over a position (is the expiring month closed at the market price and the new contract opened at the market price? -- what about commissions?). I'm curious as well.
 
Thanks coolweb - i get how the actual roll works now. And Jango - those are my thoughts exactly: what are the mecahnics and commission and slippage associated with rolling month to month.

I am looking at a time horizon of a few years - is this possible through rolling or will commission and rolling eat any potential profits?

based on the past few contracts - what is the cost if you had held and rolled ie - if a million btu's costs 7.30cents *2500 contracts - how much does it cost post roll??

thanks again
 
Quote from markcuban:

Thanks coolweb - i get how the actual roll works now. And Jango - those are my thoughts exactly: what are the mecahnics and commission and slippage associated with rolling month to month.

I am looking at a time horizon of a few years - is this possible through rolling or will commission and rolling eat any potential profits?

based on the past few contracts - what is the cost if you had held and rolled ie - if a million btu's costs 7.30cents *2500 contracts - how much does it cost post roll??

thanks again
More...

Carrying costs, and not commissions, would be the biggest cost if you wanted to hold ng for the long term. Carrying costs are storage costs, and after a while, they add up. They will continue to go up as interest rates head higher.

At expiration the electronic contracts are settled in cash. There is no risk of delivery. In that way they are like stock index futures/options.
 
synic...

when you say carrying costs - are you referring to the cost to pay up for the forward month? or are there specific costs like silver to hold your inventory?

in either case - where on i/b or nymex might i learn more about this??


thanks.
 
I had the same dilemma some months ago and nobody in ET could give me a straight answer either.

After looking at the way business is conducted in most futures, looking at OI for each contract I concluded that is cheaper to buy the front month and rollover than buying far out months because of the spread.

In some cases though, the difference between front and back months is not so big.

At the end I figured that if OI is highest in the front month and very little OI in any other back month, all traders must know what they are doing so the front month must be the best deal.

But again, this is just an observation from a very humble futures trader....
 
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