NG natgas play on curve .....

C

cdcaveman

just a thought here.. this was a rather extreme move up.. looking to use a bull or bear calender spread in the futures to take a longer and shorter term position in the futures... basically 1 thought is to fade the current move in the front and go long in the back.. i have a little understanding of the differential between summer and winter months.. i've been looking at


M13/Z13 which is the jun 13/dec 13 calender spread...
(that would be selling jun and buying dec, if you were going long a calender which is esentially a bear spread.)
i thought buying winter month against selling the summer would be a good proxy to short this move.. any thoughts..

Z13/M14 which is a dec 13/ jun 14 calender spread..

( this is long the front , short the back,....... i'm not sure but could you sell this spread to offset your risk in the first?)
 
Quote from riskaddict:

Sounds like a plan to me. What strikes? I would be selling the jun 4.5 calls and buy the 4.5 nov or dec calls. When I plop this in the analyze tool I get a cool seagull looking formation and even if iv spikes by 5% in the short run it doesn't seems to have that adverse of an effect. Is IV always this high in NG or is it normal? Compared to oil even as of late it seems high. Or are you just talking about shorting and buying the actual contracts?

I guess it all depends on how much you think it will correct. 3.80 Seems reasonable. But it could also go to 5 first. It could also be 60 degrees right through December. But the nice thing about spreading is you can adjust along the way.

I am in no way an energy trader or an options trader I know a real energy trader that works at SIG and what she knows off the top of her head makes my eyes glaze over and I usually just end up staring at her tits..
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quoting you here from the CL thread..

i actually was talking about futures contracts.. instead of options here.. but options could be used although it would be a different play with the strike risk involved in buying options calenders..
 
sorry for the double post.. here is the call skew.. and the average of the put and calls


call skew


callskewng.png



here is the call/put smirk by call and put average

callsandputsaverageng.png
 
Quote from riskaddict:

very interesting stuff. Would this help determine a reasonable price to pay for an option that is far out like nov or december?
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i mean in general it does b/c you can see the trend of the spread (if only brian hunter would have followed the trend when he blew up at amaranth) and the other chart of IV shows which months are more expensive and which strikes. i'd stick w/ ATM options in general as opposed to taking a flier on a OTM unless it's a small % of capital and you have some reason to think there will be a huge move before expiry.
 
Quote from FrankSlaughtery:

i mean in general it does b/c you can see the trend of the spread (if only brian hunter would have followed the trend when he blew up at amaranth) and the other chart of IV shows which months are more expensive and which strikes. i'd stick w/ ATM options in general as opposed to taking a flier on a OTM unless it's a small % of capital and you have some reason to think there will be a huge move before expiry.
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you ever trading calenders with options on these kind of futures?
 
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