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If you were perfect you could have made these 6 (or 7 depending how you count) trades today in Natural Gas and made 14.2% unlevered or 243% of the required overnight margin rate!
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As far as i know, unfortunately, it only works for charts < 2days, not monthly or year charts.
at least i can't turn on the volume histogram when i take a wider range.
@SMCJB care to share your thought who was selling (1 big party?/ commercial) and who was buying (speculators)?
below the updated NG inventory chart, light green is 2014
so far nothing special, will get interesting if we get below 1000bcf
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The extreme 10 cent moves in one hour on NG this winter are making it look like 2006 again. Extremely large traders moving the market and battling it out.
NG trending really well. It is trading like CL use to trade. Hope it keeps up for a while.
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New margins for NG contracts effective after the close of business on Monday Jan 27 - spec 3300/3000, NG vol scans also going up. 20% increase in maintenance margins just a day after 10% hike.
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In one day, a 44.5% increase in Mar Natural Gas ATM implied volatility. An extreme move for sure and perhaps unprecedented.
FWIW, ATM IV in Feb doubled in a day (from about 46% to 106-108%, but that doesn't really count (unless you have a position). Feb options had only 4 DTE vs. 32 in Mar.
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NGH4, 700C, six month history of implied volatility vs. underlying futures price, most recent markers are for Mon Jan 27 close.
It's too early for a post-mortem because the patient is alive ... HE'S ALIVE! ... but in the coming days it will be interesting to see if mean reversion will occur. FYI, the IV was bid at least as high as 126% on Sunday night/early Mon a.m. before I went to bed. It settled Monday (same trading day) at 105%.
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I like this attached plotted chart! Care to say where it comes from, and also would you consider NG mean IV in this example as 46% to be a normal average mean for NG?
To clarify, this is the IV for a 700C. The mean for the ATM IV is significantly lower.
The recent IV mean of 46% for a strike this far out of the money is kind of high over the last three years (2012 NG price plunge excepted), but it's low over a longer trading history. NG is famous for its volatility, probably the most volatility someone can get on an exchange-traded product. (For even more volatility I think you need to go to the over the counter energy and power markets.)
I'll address your other post later today - the one about long term analysis of HV and IV.
As for the chart above, it's from the Personal Professional version of Quikstrike. I subscribe to Personal Standard and am in a trial for Pro. Pro has some very nice features which are hard to find elsewhere but it's also $300/mo vs. $100/mo for Standard.
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Did you see volume today? Feb traded only 15,000 lots. With the new rules positions have to be so small going into expiry that any issue at all can cause a significant price swing. ICE volume was almost 3x as much as NYMEX in Feb.
Not sure if its related but ICE had an exchange issue for about 5 mins at approximately 13:30 EPT with their Henry Hub contract. Not sure what would have happened if they hadn't had that issue.
For what its worth physical prices are up 50c in the supply area's, so this wasn't purely an expiration squeeze. If it was physical prices would not have risen in line.
Good point. With HH cash at a significant premium to Feb futures it seems like something had to give by 2:30 pm ET today. I'm sure there were some games, along with some panic buying, but unless NG futures are way different than most other futures contracts, cash and futures are supposed to converge near and at delivery date.
Do you know if things are getting better? They've added a lot of delivery points and did something with storage rates in wheat (SRW), but I don't know if the changes have helped.
Right now this is all about weather and that also drives cash. Note, Z6 spot reached $120.69 a week ago. It's getting colder now, forecasters are predicting heavy snow storms next week across all NE like crazy. Think this ICE accident simply added to the entire frenzy.
Here's an interesting bit of info. The position limit drops to 1,000 contracts for the last 3 trading days. The last trading day for traders to get under this limit was Friday. Feb NG was up 0.452 that day.
I don't think it is a coincidence that the two trading days with the biggest price increase this year were days when traders had to get out of positions.
Also Feb NG on Monday after Friday's big rise was down 0.335.
I can't wait for the book telling us what really happened in NG the winter of 13/14.
Wow what a move. I turned my AT off. Was just to much swing for my comfort zone. But I should have left it on because would have made a killing. Better safe than sorry. At least I think better safe than sorry.
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When I wrote the post Mar NG 450 put was offered 6 ticks lower than settlement. Every OTM put was offered lower than settlement. I don't look at ATM options.
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Well it's been a crazy volatile few weeks.
ATR of the Feb NG contract overly the last 4 trading days before expiry was a stunning 10.5% and over the last 6 days a whopping 9.0% (5.8, 6.3, 11, 11.8, 5.6. 13.5). Yes that's an average range of 10.5% over a four day period!!!
In the 10 trading days since Feb has expired Mar has had an ATR of 8.0%! To illustrate the volatility of the Mar-Apr spread, Apr has an ATR of 3.8%, under half Mar over the same 10 days.
Rumors abound on who the big winners and losers are. WSJ did report the Head of DE Shaw's energy group is out after they lost in excess of $100 Million but I suspect that's just the tip of the iceberg. We'll probably have to wait 10 years for a book to explain all!
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I believe position limits for Mar NG come into effect by open Monday 24th so effectively close Friday 21st.
Tuesday 25th is penultimate, which on top of all the normal options expiring, there are massive amounts of financial Mar-Apr Spread Options expiring/settling based upon Tuesdays Close.
Wednesday 26th is expiration.
I suspect this all means that Fri 21st, Mon 24th, Tue 25th could all be interesting days.
That's for sure. Couple of data points, which exclude the ICE, OTC and non-vanilla stuff mentioned above:
Current open interest for NYMEX NG American style options is 369K. 226K of them are March.
Current open interest for NYMEX NG European style options is 5.3 million. 1 million of them are March.
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Expiration used to be one of the most volatile days of the month but since they significantly changed the position limits I would have said (never researched this so have no statistical evidence to back up my gut feel) that expiration is now one of the least volatile days, as nobody caries positions any more.
Saying that your right last expiry (Feb) was one of the most volatile trading days in years so your right, Wednesday 26th definitely could be a roller coaster as well.
Hi - Are those Balmo figures available only to those with a paid subscription to one of the ICE data products? I can get a summary report of the ICE day-ahead market, but summary reports for the balance of month (fixed price) and forward basis trades appear to be subscription-only.
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I'm not sure. I have an ICE subscription and they are emailed to me every day. There are a lot of reports available on the website but I can't seem to find the exact reports I am getting.
You can get some reports but they are PDFs. Go to the data site and select " End of Day Reports", then "ICE Futures US - Energy", and "DMR-IFED Futures" and then under contract select what you want (or even all)
For example if you select contract ALS you will get the Algonquin Swing Swap report and you can see the $23.355 prices for balance of the month I mentioned previously.
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I tried trading this market, but myself found it was not as easy to trade as CL. The liquidity was a low at the time I was trading it, that may have been a big factor. Hows the liquidity for you folks trading it now? do you see a lot of gapping in the market and apart from the weather how would you describe the way this market trades? I'd be interested in some of your opinions on this. Thanks.
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I assume you are talking about NG? Natural Gas is extremely volatile/choppy/gappy what ever you want to call it. Huge 10% moves day after day. If your looking to 'try out NG' for lack of a better expression i would suggest you wait until next Thursday 27th once March has expired and hopefully some normality returns to the market.
Thank you. If it's of benefit to others, the DMR-IFED report is a huge pdf full of tables for gas, electricity and the kitchen sink. As far as I know, you can't filter it by commodity or trade type before downloading, so if you want to follow a handful of market points, you should find the codes for the reports and download them individually. To build any kind of broader, longer term database, I think it's time to subscribe to the ICE or to a third party firm that consolidates the data.
P.S. I'm going to ask the ICE how much the gas-only report costs. If their response doesn't give me a heart attack, I'll report back.
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At time of writing 9:11am EPT, NG market is down 6.5c but has already had over a 50c range TODAY. Trading as high as $6.40 (+25.1c) in the middle of the night (4am) and as low as $5.892 (-25.7c) this morning.
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The report I get is basically that DMR-IFED report in excel so its easy to import and sort. Sounds like what you are looking for. They have lots of reports they email out but the one you are probably looking for is their "Cleared Gas Settlement" and not their EOD report. Make sure you make that clear because I know the EOD report is very expensive.
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I am really not finding it to be gappy or thin. Now it does move very very fast. Much faster than CL as of late and has great range. It reminds me of the way CL moved a few years ago. I execute on an automated strategy so speed is not a problem.
We are in winter so my opinion about liquidity might change as winter ends.
If you want volatility and range for last two months has been the mother of all contracts.
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The good news is they responded promptly. The bad news is the price. The EOD report for gas only that includes three major sections (the INDICIES, ACTIVITY and DEALS tabs) is 1500 buckaroos per month for one to three users. I then followed up to ask about the "Cleared Gas Settlement" report because I'm only looking for the data in the INDICIES tab, and the guy said that information is available only to ICE participants.
So, I'm going to hunt and peck for a few market points where I want to gather occasional forward basis information. When I get sick of that I might try to figure out a script/macro to automate the process. If that fails I might hire my lovely assistant (my wife) to do the grunt work. And when she gets sick of it, I will have made so much money that I can justify $1500/mo!
Could many CL traders be moving to NG? CL has been kind of dead for a while relative to the what it use to do. While NG is on fire. It trends directionally so strong looks like traders pile into it when it moves with the trend. It gets kind of crazy which I like. 30 to 40 tick targets can get hit easily within minutes if not seconds at times.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
But when it moves it's most often way too fast to get in manually, so I'm currently working on an automated strategy...should be accomplished on the weekend.
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I agree it really takes an automated strat to handle the speed. The speed is really insane at times but very profitable.
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Watching it closely the past few days made me think the same thing. It is moving a lot like CL back in its heyday. A strong move one way and another strong move retracing it.
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I agree on the speed as well, and since I'm quite new to NG, I'll need to watch it's behavior more closely and act carefully.
Currently the biggest challenge for the strategy is to determine where to place a reasonable stop for a given timeframe...that's still quite an issue in regards to maintain a decent R/R ratio.
Edit:
FWIW, just to give an impression of my charts...looks like NG respects VWAP, ADR and ADN most of the times.
The green and red stripes are showing the potential entry points of the automated strategy, but as I already mentioned before, I'll have to do some additional adjustments before I go live.
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I would recommend that you not consider the last two weeks of NG price action as 'normal'. I think you will find a very very different market in 8 days time once March expires.
@SMCJB Seems the last 8 weeks has been beyond normal. My strat has done two times an entire normal years profit in 8 weeks. Question for me is this all related to cold or is there a structural change happening in the market? I don't show at least in my backtests anything close to this happening in previous winters. I kind of expect it to calm down but would be very happy if it did not.
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Last 4 weeks since we got close to Feb expiry have been the really crazy days.
Congratz, pretty impressive. last 4 days I'm up what i normally make in a month, not nearly as good but still pretty nice.
It's weather and storage related. Once April becomes prompt things will change. April may (and probably will) be more volatile than normal, but nothing like what Feb & March have been.
I think you'll find that the last time this happened the market wasn't as electronic as it is now, so it was a different market.
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Question -- are you using Shark Indicators' new Falcon? I didn't know that was out yet. I keep hearing about it, but am not sure exactly what that is. Or is this the name you gave your strategy.
No, actually it's still the SI Raven Autotrader. I've heard about their new Falcon several times as well, but as far as I know there's no update regarding the release date...
In my chart the Falcon Swing actually is the name of a system / method which is part of the Diversified Trading System (DTS) by Indicator Warehouse. The other chart with the 20 tick Renko bars shows the Eagle Trend Trader.
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2 months in a row the front month NG contract was up on the 4th last trading day and down on the 3rd last trading day (today). It was also up big on last trading day last month. But i suspect this might not happen next month.
WOW. What a ride. I took a pretty big loss early on selling 6.9 and 7.4 calls. I'm very glad I got out when I did, but still lost $15k. That trade would have been underwater by several 10s of thousands up until a few days ago.
I got back in on 2/4, 2/10 and 2/18 by selling 11s, 10s and 9s. Took some heat, but managed to hold on. Made back a whopping $4300.
I think I'm going to follow Kevinkdog's plan to avoid NGH5 next year and any NGH# after that!
Thanks to those who gave me their advice during the process.
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Wednesday it dropped even lower, and on Thursday cash prices for March (at Henry) dropped yet another 20c lower before finally rallying a little today.
Henry Swing Swap for March settled $6.13 on 21st and $4.65 on 27th a drop of 24.3%. (Futures expired at $4.855 on 26th).
I looked at what swing swaps did for locations other than Henry, to try and see if this was a phenomenon that was effecting financial futures but not physical gas.
Prices in the constrained area's of the Northeast generally dropped Monday, were mixed on Tuesday but rallied Wednesday and Thursday finishing down approximately 10% despite Henry dropping 24%.
Prices in the Midwest, which is where the much below tempretures for the next 15 days are focused, dropped Monday but rallied Tuesday, Wednesday and Thursday, finishing up 15+%
Prices in the Gulf and Texas seemed to drop fairly much in line with Henry, although in many cases not quite as much.
Prices in the west dropped each day but not nearly as much as Henry with the index's I looked at dropping about 15%.
What does all this mean? I wish I knew.
I'm with Ron though that this seemed like a rather large move given little if any fundamental changes.
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NG isn't the only commodity doing crazy things at expiration.
Mar SB was 16.33 on 2/20. Two trading days later it was 17.41, up 6.6%, on the 24th. It was 17.44 the day before expiration and then it dropped 0.97 on expiration day, 2/28. Or 5.5%.
I wonder if somebody with deep pockets figured out how to profit from moving markets when they have low volume near expiration.
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For those of you that had all the fun/anguish of trading March Natural Gas you might be interested to know that yesterday balance of the month (ie Mar 14-31) traded below April for the first time!
The first 14 days of March Henry Gas Daily averaged $5.21. Hence as of last night March Henry GDD looks to be on target to price out at about $4.75 or April +37c which is also March Settlement -10c.
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ATR's for Natgas this month
20th 25.2c or 5.8%
19th 31.4c or 7.4%
Average last 3 days (18-20) 25.1c or 5.8%
Average last 5 days (14-20) 23.4c or 5.9%
Average last 10 days (7-20) 21.7c or 4.9%
Average November (14 days) 21.1c or 5.4%
Usually that means above normal amount of hurricanes. But with fracking, does that matter anymore as far as NG production? I see that Gulf NG production is now only 4% of US production.
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Very interesting, Thanks for the link.
To be honest with the way NG and CL have been in the last year I've become for a Crude trader than a NatGas trader and haven't been paying as much attention to things like this as I used to.
I did ask around though today, and while several people did find it interesting, the general reaction seemed to be indifference.
I suspect this comes down to two main reasons. 1) as you mentioned offshore production is far less significant than it used to be and 2) since Katrina the industry generally views 'canes to be more demand destructive than supply destructive.
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I put in an order at 0.3.. will adjust based on what i see
I dont think this is over yet..
NG 14 went to 6.5 and at that time the fly was 0.26
We are already at at 4.8 and its only mid Nov.. not sure how high we go this year.. so the fly may really "fly" this year
