NexusFi: Find Your Edge


Home Menu

 





Trading natural gas futures


Discussion in Commodities

Updated
      Top Posters
    1. looks_one SMCJB with 185 posts (360 thanks)
    2. looks_two myrrdin with 21 posts (41 thanks)
    3. looks_3 ron99 with 20 posts (50 thanks)
    4. looks_4 jokertrader with 17 posts (12 thanks)
      Best Posters
    1. looks_one ron99 with 2.5 thanks per post
    2. looks_two myrrdin with 2 thanks per post
    3. looks_3 SMCJB with 1.9 thanks per post
    4. looks_4 Symple with 1.7 thanks per post
    1. trending_up 86,558 views
    2. thumb_up 557 thanks given
    3. group 71 followers
    1. forum 368 posts
    2. attach_file 49 attachments




 
Search this Thread

Trading natural gas futures

  #101 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192

That's an interesting question, and the answer is very different today than it would have been ten years ago before everything went electronic. Today because of HFT and the ease to make electronic markets there are markets that have low volume but very high liquidity. Take for example QM, the crude oil eMini. Yesterday it only traded 22,000 lots but I suspect the bid-ask was 1 tick wide the entire day - it is arbitraged against CL the full size contract. So liquidity isn't 100% volume based.

Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
New Micros: Ultra 10-Year & Ultra T-Bond -- Live Now
Treasury Notes and Bonds
Futures True Range Report
The Elite Circle
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Better Renko Gaps
The Elite Circle
Are there any eval firms that allow you to sink to your …
Traders Hideout
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
61 thanks
Funded Trader platforms
38 thanks
NexusFi site changelog and issues/problem reporting
27 thanks
GFIs1 1 DAX trade per day journal
19 thanks
The Program
18 thanks
  #102 (permalink)
kazz
London
 
Posts: 150 since Apr 2018
Thanks Given: 168
Thanks Received: 78


SMCJB View Post
That's an interesting question, and the answer is very different today than it would have been ten years ago before everything went electronic. Today because of HFT and the ease to make electronic markets there are markets that have low volume but very high liquidity. Take for example QM, the crude oil eMini. Yesterday it only traded 22,000 lots but I suspect the bid-ask was 1 tick wide the entire day - it is arbitraged against CL the full size contract. So liquidity isn't 100% volume based.

Thanks really appreciate your reply. This issue of volume v liquidity is what is confusing me. I was equating high volume with high liquidity but it seems like this may not be the case? For example, the Eurodollar has very high volume but very low margin which indicates low liquidity to me?

Sent using the NexusFi mobile app

Reply With Quote
  #103 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192


They are different things. Margin is risk based and it's simplest form is a function of contract size and volatility. Volume is obviously how much a contract trades and liquidity is how efficiently you can enter and exit positions, at good times and bad. Liquidity is also trade volume dependent, trading 1 lot can be different than 1000.

Some examples
- Eurodollar has low margin, high volume and massive liquidity. Literally 1 tick wide, tens of thousands on bid and offer.
- In contrast there are many energy products that only trade over the counter. Hence if you were to look them up some of them might appear to have high volume, but for an electronic trader they have literally zero liquidity as they dont trade on screen.
- Natural Gas has something called "Bid WeeK" (last 5 business days of the month) where gas is bought and sold for the following delivery month. If you log onto ICE during bid week you will see lots of these products not only trading but also having quiet deep markets, but if you check early in the month there won't be a single quoted market. So that's a case of liquidity changing due to time of month.
- Liquidity can be heavily effected by news events. There are important data releases, employment, payroll, product in storage etc that are released at predetermined times. For Natural Gas the EIA release gas in storage on a Thursday at 10:30 Eastern. As such liquidity starts drying up at 10:28 and at 10:29.59 there's almost nothing there at all. So if you send your order exactly then you are probably going to experience massive slippage, but if you send it 1 minute later the market is more than likely be back to 1 tic wide.
- Crude Oil is very international in nature. On days where there is a European (especially British) Holiday, but not a US Holiday, you will notice lower volumes, but for most purposes liquidity is unchanged for all but the largest orders.

Reply With Quote
  #104 (permalink)
kazz
London
 
Posts: 150 since Apr 2018
Thanks Given: 168
Thanks Received: 78


SMCJB View Post
They are different things. Margin is risk based and it's simplest form is a function of contract size and volatility. Volume is obviously how much a contract trades and liquidity is how efficiently you can enter and exit positions, at good times and bad. Liquidity is also trade volume dependent, trading 1 lot can be different than 1000.

Some examples
- Eurodollar has low margin, high volume and massive liquidity. Literally 1 tick wide, tens of thousands on bid and offer.
- In contrast there are many energy products that only trade over the counter. Hence if you were to look them up some of them might appear to have high volume, but for an electronic trader they have literally zero liquidity as they dont trade on screen.
- Natural Gas has something called "Bid WeeK" (last 5 business days of the month) where gas is bought and sold for the following delivery month. If you log onto ICE during bid week you will see lots of these products not only trading but also having quiet deep markets, but if you check early in the month there won't be a single quoted market. So that's a case of liquidity changing due to time of month.
- Liquidity can be heavily effected by news events. There are important data releases, employment, payroll, product in storage etc that are released at predetermined times. For Natural Gas the EIA release gas in storage on a Thursday at 10:30 Eastern. As such liquidity starts drying up at 10:28 and at 10:29.59 there's almost nothing there at all. So if you send your order exactly then you are probably going to experience massive slippage, but if you send it 1 minute later the market is more than likely be back to 1 tic wide.
- Crude Oil is very international in nature. On days where there is a European (especially British) Holiday, but not a US Holiday, you will notice lower volumes, but for most purposes liquidity is unchanged for all but the largest orders.

Thanks, this is an amazing post and clears up plenty for me regarding liquidity v volume.

Coming back to the Eurodollar, would you say this is a good product for a beginner to start with? I've also read that the ZN is good (treasury notes).

Sent using the NexusFi mobile app

Reply With Quote
  #105 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192

I have no experience trading Eurodollar's in the way you would so can not answer that.

Reply With Quote
Thanked by:
  #106 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,686
Thanks Received: 2,651


kazz View Post
Thanks, this is an amazing post and clears up plenty for me regarding liquidity v volume.

Coming back to the Eurodollar, would you say this is a good product for a beginner to start with? I've also read that the ZN is good (treasury notes).

Sent using the NexusFi mobile app

I do not think it is possible to give an easy answer, eg. "yes" or "no".

My trading is mostly based on fundamental information. My interest is more towards growing commodities (eg. corn, wheat, coffee, lumber) and energies, and thus, most of my trades include these commodities. Interest rates are influenced by very many factors and events, and, thus, I think it is difficult for a beginner to trade the Eurodollar, based on fundamental data. (As long as you do not have a special education in this field.) In case you are iontereted in trading based on fundamentals, it is a good idea to start with a commodity with which you like spending many hours ...

I know traders who love trading the Eurodollar, trading based on charts. But I do not have an own opinion on this topic.

Best regards, Myrrdin

Reply With Quote
  #107 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192


SMCJB View Post
NG "Tier" Margins are dropping (which is actually what they announced)
- Tier 1 down $900 to $1850
- Tier 2 down $250 to $1300
- Tier 3 down $200 to $1100

But as you highlighted since this is effective 27th, and March expires on the 26th, April is going from Tier 2 to Tier 1, which results in an actual increase.

So if you have an April position margin is going up.
If you have a prompt month position, and are rolling March to April, then margins go down.

Effective today Tier 1/May'19 NG Member margin requirement drops from $1850 to $1650. Jun-Oct unchanged.

Reply With Quote
Thanked by:
  #108 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


SMCJB View Post
Effective today Tier 1/May'19 NG Member margin requirement drops from $1850 to $1650. Jun-Oct unchanged.

That's effective at close of trading for today.

Non-member rate is $1815. That's a drop of 10.8% for option margin for May.

Reply With Quote
Thanked by:
  #109 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192

Effective COB May 1st Tier 1/Jun'19 NG Member margin requirement drops from $1650 to $1400. Jul-Oct drop $100 to $1200 in July and $1000 for Aug-Oct.
Non Member rates are 110% of these numbers.

Reply With Quote
Thanked by:
  #110 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192


For the second week in a row the EIA reported the largest ever storage injection for this week of the year!

In the last 7 weeks storage has gone from more than 350 BCF below last to year, to more than 100 BCF higher than last year. Quiet a swing!

Reply With Quote
Thanked by:




Last Updated on March 25, 2024


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts