Natural Gas
- Thread starter POSK
- Start date
I see the spike in 2014....and the chart actually looks bullish.
However, We must have a strong economy to support that case.
That chart is smoothed. You can't just toss out the contango and call it a day. Anyway, I don't think there is much upside here. Summer demand is winding down and the market is still well over supplied. The curve is steep enough given the demand we have going into withdrawal season. Do what you want with it, just whatever you do, don't buy and hold it. And please guys, study the freaking mechanics of these markets. I'm not trying to be a dick here, I'm actually trying to save you guys some money. Charts are very deceiving in commodity markets especially markets that have storage dynamics.
No, again the chart you posted above from trading economics is wrong. They are showing a continous contract. You have to add the roll in from every single month which makes the chart one large downtrend since 2008. Any commodity that is stored has a storage cost that will not be on a futures chart. It will however be reflected in the ETF like UNG because the ETF "pays" the roll yield. This is VERY important to understand. There is no way you can make money long term holding natural gas as a buy and hold while still paying the roll yield. The math just doesn't work. This is precisely why players in this space focus more on energy spreads vs the outrights.
http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91311004
I think the Magician's post in the above thread is the correct formula.
Now I understand what you are talking about Mav.
I think the Magician's post in the above thread is the correct formula.
Now I understand what you are talking about Mav.
Yes, the important part to remember here is that you cannot buy and hold anything that has a predominant contango structure which is due mostly to storage costs but also applies to things like the VIX. Hence why all the leveraged vix ETFs go to zero. The roll eventually wipes out your entire investment.
It's been years since I traded NG or rolled any trade. I just saw the UNG chart before I came here and was wondering why it looks much different than the futures charts.
So Handle, how have you been handling your position? Have the roll adjustments in price been killing you? If I was holding this position and losing as much as it seems you would when rolling
So Handle, how have you been handling your position? Have the roll adjustments in price been killing you? If I was holding this position and losing as much as it seems you would when rolling