Always remember that they call nat gas the widow-maker for a reason. Something people also don't understand about nat gas is it's seasonality. Summer is its peak season, not winter. Why? Because more is needed in summer than in winter.
To explain: while nat gas is used for heating it is also used for cooling in the form of peaking generation for air conditioning. As well, generally industrial usage is higher in the summer. Finally and perhaps most importantly, the storage demand (i.e. to put nat gas away for the winter) occurs in the summer, while the other uses are also going on.
The usual trade is to buy nat gas for June and July and sell the shoulder (i.e. spring months) when everyone is confused why price is falling in winter, when they think it should be at it highest. In this case, UNG is one (very inefficient) instrument to trade for this by using a horizontal spread, i.e. selling April calls and buying same price June calls. A reasonable bounce area looks to be in the 14 range for UNG, so a ladder of spreads in the area around that price would be a prudent approach.
To explain: while nat gas is used for heating it is also used for cooling in the form of peaking generation for air conditioning. As well, generally industrial usage is higher in the summer. Finally and perhaps most importantly, the storage demand (i.e. to put nat gas away for the winter) occurs in the summer, while the other uses are also going on.
The usual trade is to buy nat gas for June and July and sell the shoulder (i.e. spring months) when everyone is confused why price is falling in winter, when they think it should be at it highest. In this case, UNG is one (very inefficient) instrument to trade for this by using a horizontal spread, i.e. selling April calls and buying same price June calls. A reasonable bounce area looks to be in the 14 range for UNG, so a ladder of spreads in the area around that price would be a prudent approach.
Note
Daily and present weekly chart suggest lows may be in for this move.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.