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Trading natural gas futures


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Trading natural gas futures

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  #31 (permalink)
 jokertrader 
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SMCJB View Post
The "Widow Maker" specifically refers to the Natural Gas March-April spread and not to Natural Gas in general, but you are right at times Natural Gas can be violently volatile. So volatile in fact for many years it was considered completely inappropriate for retail and even many pro traders. With the extra supply of Natural Gas from Shale Drilling, NG fundamentals have been relatively bearish for several years now, and volatility has also been greatly depressed. One cold winter can turn that around very quickly though.

Has the March/April ever been negative? I can see the spread is pretty low.. this morning it was 0.060.. has this ever become negative? like March lesser than April?

If no, then is it just a matter of buying it and knowing when to get out on a spike.. before a decline into March?

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  #32 (permalink)
 SMCJB 
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It goes negative quite often but only leading up to expiry when its obvious that there is enough gas in storage to meet end of winter demand. I don't think I've ever seen it go negative early in the winter. I might run some numbers tonight and look.

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  #33 (permalink)
 SMCJB 
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So in the last 18 years the average HJ spread goes negative about 2 weeks before expiry.

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 SMCJB 
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One more.

That last one made it seem like HJ was unseasonably low, but those averages and standard deviations are heavily influenced by pre-2008. This is how it changes when we only look at last 10 years. (Scales are slightly shorter)


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 jokertrader 
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In the last graph.. if the average is the black line.. doesnt look like its a clean spike up.. in fact a gentle trend down

so its hope for cold winter.. less storage for spike up...unless im not reading it right

of course several years have the winter spike.. some of the colored spikes on 1st graph....but still plenty of years/lines are all just gently downtrending.. the lines at the bottom of the 1st graph

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  #36 (permalink)
 SMCJB 
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If we run out of gas, March's fundamental's are scarcity pricing. If we don't run out of gas, any gas left in ground stays there until next year, and March almost becomes the first injection month for the following year, and as such trades flat or below April. For the last 10 years the latter case has been predominant hence Mar/Apr gradually declines as it becomes more and more certain that we have ample gas supplies in storage.

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  #37 (permalink)
 SMCJB 
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With the much lower levels of stocks this year than previous years, and the increased LNG demand, I thought the fundamentals were more supportive than in the last few years. I don't normally make directional trades in NG or CL but am currently slightly long and apparently wrong! Still seems very early to be giving up on winter

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 SMCJB 
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Not sure if this means anything, but I was curious to see how the spreads 'ranked' versus previous years. Since I created it, thought I might as well post it.

For 2019 a little surprised that given how far below the average we are that the rank wasn't lower, but I guess that illustrates how skewed the upside numbers are.


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 myrrdin 
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SMCJB View Post
One more.

That last one made it seem like HJ was unseasonably low, but those averages and standard deviations are heavily influenced by pre-2008. This is how it changes when we only look at last 10 years. (Scales are slightly shorter)


The NGJ-NGH spread is called widow maker for good reason. Usually it works, but if there is a cold blast at the wrong time it can be terribly expensive to be on the wrong side.

I bought some cheap NGH calls recently. Weather experts expect La Nina with a probability of approx. 70 %, and this would result in cold weather in the North of US.

Best regards, Myrrdin

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  #40 (permalink)
 myrrdin 
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myrrdin View Post
The NGJ-NGH spread is called widow maker for good reason. Usually it works, but if there is a cold blast at the wrong time it can be terribly expensive to be on the wrong side.

I bought some cheap NGH calls recently. Weather experts expect La Nina with a probability of approx. 70 %, and this would result in cold weather in the North of US.

Best regards, Myrrdin

Today from Dave Hightower:

"The US Climate Prediction Center increased the La Nina probability to 92 % from 73 % for the December - February timeframe ... "

Best regards, Myrrdin

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