Oct Natural gas being sold bigtime
- Thread starter jasonjm
- Start date
I noticed dec especially since I have exposure to it. The news said long positions backfired on them, but they were spreads. I wonder what the hell the were doing to cause Dec to go up when the unloaded -- perhaps that was one of their only profitable months, since buying would be the way out of short positions (and May Apr of next year).
who knows... mother rock goes down for going short, and amaranth goes down for going long. what an amazing contract.
do you have any sources of more information for reading on technical details of this?
Its hardly safe for most traders in the best of times in NG, much less now.
When there is a major breakdown/blowup by a major participant, it scares other large players and they tend to wind down their exposure to avoid getting caught in someone else's stampede.
I wouldnt be surprised to see some sort of investigation into this from at least a CFTC type to maybe even some congressman , citing market interference as the reason to subpoena records. IMHO, this isnt something to be cavalier about by anyone.
And, if these guys got caught, the question regulators, and other large traders/banks etc will ask, is there someone else caught as well.
When there is a major breakdown/blowup by a major participant, it scares other large players and they tend to wind down their exposure to avoid getting caught in someone else's stampede.
I wouldnt be surprised to see some sort of investigation into this from at least a CFTC type to maybe even some congressman , citing market interference as the reason to subpoena records. IMHO, this isnt something to be cavalier about by anyone.
And, if these guys got caught, the question regulators, and other large traders/banks etc will ask, is there someone else caught as well.
by the way, i did some armchair math, and the estimated 2.5 billion dollar loss for amaranth would reflect holding 125k total natural gas contracts and losing $2.00 on each and every one.
since open interest averages between 60-90k per month over the strip, I can assume they must have held 10k or more contracts on some months? possible?
I need a good news source for all things NG, because it seems information is hard to come by. i missed (because I don't watch CNBC) the report talking about morgan stanley taking the liability off Amaranth's hands. I assume Amaranth is paying Morgan Stanley for the loss, at the same time preventing a total crash of the NG market. Selling that type of size at once could bring NG down to ridiculous levels, at least temporarily. Could you imagine one seller offloading 10000 contracts in a day when normal volumes are between 5-10k TOTAL ? You could probably send NG down to $2.00 doing this. And in rear months with normal volumes in the 100s, forget it.
I can only assume there will be plenty of selling pressure on top of inventory news from hereon out until Morgan Stanley has unloaded this position. I assume this will occur over the course of several months.
Of course, Morgan Stanley could make a killing if the we an unexpected freezing November.
since open interest averages between 60-90k per month over the strip, I can assume they must have held 10k or more contracts on some months? possible?
I need a good news source for all things NG, because it seems information is hard to come by. i missed (because I don't watch CNBC) the report talking about morgan stanley taking the liability off Amaranth's hands. I assume Amaranth is paying Morgan Stanley for the loss, at the same time preventing a total crash of the NG market. Selling that type of size at once could bring NG down to ridiculous levels, at least temporarily. Could you imagine one seller offloading 10000 contracts in a day when normal volumes are between 5-10k TOTAL ? You could probably send NG down to $2.00 doing this. And in rear months with normal volumes in the 100s, forget it.
I can only assume there will be plenty of selling pressure on top of inventory news from hereon out until Morgan Stanley has unloaded this position. I assume this will occur over the course of several months.
Of course, Morgan Stanley could make a killing if the we an unexpected freezing November.
Of course, a broker can take on trades for their account and hope for the best.
I think another scenario is that MS has some customers whith offsetting positions and they are trying to maintain the market by getting people to close positions gracefully. Thers lots of negative stuff that can be said at this point about the brokers, banks, funds etc who allowed a player to become as big as a market.
There is also a social policy issue if these contracts get dumped and NG collapses - the drillers stock prices collapse, layoffs occur etc. The cost to not exiting gracefully is high for funds.
I think another scenario is that MS has some customers whith offsetting positions and they are trying to maintain the market by getting people to close positions gracefully. Thers lots of negative stuff that can be said at this point about the brokers, banks, funds etc who allowed a player to become as big as a market.
There is also a social policy issue if these contracts get dumped and NG collapses - the drillers stock prices collapse, layoffs occur etc. The cost to not exiting gracefully is high for funds.