Natural gas
- Thread starter paperboy
- Start date
I went long in 2012 and added in Aug of 2013, both times taking profit on half my positions, and hedged remainder as price went up too fast. It was a time I started to alter my long term model to becoming more risk adverse. Have taken several stabs at finding the lows, sort of knew December 2015 lows were not going to be low enough as other energies were dropping and would drag NatGas down as well, so when hit 2.5, I hedged profits to watch futures eventually stop out at breakeven but didn't lose all the profits. Since mid February to beginning March I have been a buyer. I think the lows are in as Crude Oil is higher, but my opinions are not how I trade and only trade my Trading Plan which is automated. Hedging doesn't always work, I have set limit of how long as time decay chews them up, I can lose on futures position and price just stops and may start to go back up where I can lose on the hedge as well, always trade knowing you have answers before a question comes up.
Risk aversion does require much study as I never quite understood most of the books, LOL, seems too technical to me, but comes down to balancing act for so long in my case of entering the market often trying to find extremes and using options so my account doesn't take many losses, I have rules of how long I keep options and futures positions, good trades just take off in desired direction pretty quick, and when I think the chart has gone too fast too high, hedge the profits so you don't lose it all. Learn much more about options, not only will they save you from huge loses, but you can do credit spreads when markets are not trending. I have changed my model to become much longer in duration, if you look at nine year chart of all commodities they go from highs to lows to highs, so I am now trying to get min of 75 to 55% of ranges, so many rollovers, often times staying in trades years and some years are mostly option decay profits.
Long term trading for me is so much more interesting now cause of the options, but am sure in few years it will slide into boredom as well. But boredom is financially good.
Risk aversion does require much study as I never quite understood most of the books, LOL, seems too technical to me, but comes down to balancing act for so long in my case of entering the market often trying to find extremes and using options so my account doesn't take many losses, I have rules of how long I keep options and futures positions, good trades just take off in desired direction pretty quick, and when I think the chart has gone too fast too high, hedge the profits so you don't lose it all. Learn much more about options, not only will they save you from huge loses, but you can do credit spreads when markets are not trending. I have changed my model to become much longer in duration, if you look at nine year chart of all commodities they go from highs to lows to highs, so I am now trying to get min of 75 to 55% of ranges, so many rollovers, often times staying in trades years and some years are mostly option decay profits.
Long term trading for me is so much more interesting now cause of the options, but am sure in few years it will slide into boredom as well. But boredom is financially good.
Oil and gas are very different markets. One is used primarily for electricity generation and heating homes, the other for transportation. We are drowning in supply. You need to watch these levels very carefully. If we get overfilled in storage what that means is any new production will get dumped on the market at fire sale prices. Yes, gas could go sub $1. UNG could trade down to pennies. Oil could trade to $10. What you guys are seeing when there is a bounce in price is not related to the commodity itself but simply the front month which is more of a delivery process. You will see sharp rallies when shorts get squeezed on the rolls but this has NOTHING to do with the long term economics of what's really going on. You guys really should not be bottom picking this unless you are deeply analyzing the forward curves and the storage market.
"You Guys" should stick to selling things and leave trading the market to us
Just to add a point to the very good information provided by Maverick. Most producers will hedge production by selling calendar strips - especially in a soft market like the present one. The producer trading desks will simply buy the front to second month calendar spread in order to roll their strip hedges. Hedge offsets like this might cause some very temporary price distortions but nothing to get excited about.