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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
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NG Margin increase effective October 23, 2020
Maintenance margin's increasing as follows (Note: Non-member initial margin rates will be 110% of these)
Tier 1 / Nov20 unchanged at $3150
Tier 2 / Dec20 from $2700 to $2900 +$200
Tier 3 / Jan21 from $2525 to $2650 +$125
Tier 4 / Feb21 unchanged at $2425
Tier 5 / Mar21 from $2150 to $2300 +$150
Tier 6 / Apr21 from $1050 to $1200 +$150
Tier 7 / May21 from $1050 to $1125 +$75
Finally got around to listening to this (well, the trading part, anyway) - appreciate you sharing it.
I'm very curious though, what kind of trades he was putting on as his so-called bread and butter to make so much money? Were there truly such massive, glaring market inefficiencies in those days that he was able to just print free money year after year, or was there something else going on that he doesn't want to talk about?
He repeatedly mentions providing liquidity and warehousing risk, but his returns are absolutely astonishing. How could one guy, starting with just $8mm in capital be up 30+ percent month after month after month, doing "market making and arbitrage" type trades? Market-making and arbitrage profits are measured in ticks and basis points, but he was making well over 1 percent per day on his capital. What am I missing?
At 36:10, talking about his days at Enron, he says "I can't speak exactly about why the trading group was making so much money..." I'm genuinely curious as to why that might be.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205
Printed -$0.75 for the weekend just gone... printing $1.50 for November!
Gas back then was a very different market then it is now. Arbitrage profits were not measured in ticks and basis points. At volatile times the bid ask on prompt month would be a whole penny (10 ticks). Below is a chart of the March-April spread. I haven't updated in a couple of years but I think you get the picture. This "spread" regularly moved 50c in a week back then. That's $5000 per contract and they were trading them in 500 lot blocks. Still I think your question is a good one and I don't know the answer. I know that he did have drawdowns and at one point was down 50% I believe. I also know that he was one of the biggest, if not the biggest winner, on the other side of Amaranth when they lost over $3 Billion in Natural Gas. The book " Hedge Hogs: The Cowboy Traders Behind Wall Street's Largest Hedge Fund Disaster" tells the story well. I was trading in these markets back then and while I knew there were some enormous positions on I didn't realize how large until reading that book.
With regards to the Enron comment, I honestly don't know. They did have Enron Online though, and that was printing money as fast as it could be printed. Imagine having an electronic market place similar to what we have now, but that its the only electronic market with no competition. Now imagine that the market is run by the largest trader in the market and they consistently post prices tighter than quoted on the NYMEX floor. That was Enron Online. Enron Online was so big and so effective that was how ICE as born. Five of the next 6 or 7 largest gas and power traders, formed/supported ICE as a way to counteract Enron Online. (This is obviously long before ICE bought the NYSE and even before buying the IPE). Before their demise, Enron were massive in the US Natural Gas and Power markets, dominating in a way rarely seen anymore. And before everybody screams but it was all a fraud, there was never any allegation of fraud or losses in the wholesale trading group. Bandwidth, Water, International etc yes. Wholesale trading (Enron Capital & Trade Resources or what ever it was eventually called). Never.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205
Forgot the chart.
To explain, each line shows the Mar-Apr spread for a different a year. Y Axis is price, and X axis is days to expiration. Prices 500 days (2 years) before expiration start at the left, with price at expiration to the right, mostly the bottom right!
Does any one know some good books on algo trading with mean reversion or counter trend strategies. I've heard recently that NG is great for Mean Reverting Strategies. I am kind of a newbie and I have a very limited understanding of how to code mean reverting entries and exits.
I have one that uses a dueling momentum approach. Curious if there are other ideas out there.
Futures prices for ... Henry Hub in January 2021 have fallen to just over $2.40 ... down from almost $3.50 at the end of October.
... the six-month calendar spread between ... January and July has slumped into a contango of almost 13 cents, from a backwardation of over 40 cents.
The Lower 48 states are now roughly a quarter of the way through the winter heating season ... temperatures across the Lower 48 have been warmer than normal, and heating demand has been 12% below the long-term average, according to the Climate Prediction Center.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205
Just FYI, not sure if people know but cash prices went crazy for this weekend with the highest being for gas in Oklahoma at $391 (Enable), $375 (ONEOK). Yes that's nearly $400/MMBtu 100x times what they were a week ago.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205
That's a good question. Here in Houston, which is the 4th largest city in the US we have temps of 16F/-9c which is the coldest in a very long time, and 57% of the city is without power due to generation outages. While 25% of wind generation is out due to freezing, thats only 1000MW of the 30000 that is off line. Apparently the generation is all off line because they can't get the gas to run it. Gas prices for HSC (Houston Ship Channel) for this weekend were $160. HSC is a large trading point, much larger than the OK points I referenced above.
