Morning Thoughts – Oldinvestor

This one stuck out. More LNG nonsense… Ok, so I pasted the link, but it’s super long, let’s try this…

S&P Platts article: US-China tensions cast shadow over bilateral LNG trade

So this is about Chinese being in the rest of the boat as everyone else in the world right now. Demand is soft; demand growth is still backward, and natgas storage is at/near record highs. So the Chinese are going to use this as leverage over the “Trade agreements”. The question is, how much do they like buying gas from Russia? We know that Qatar and Australia did not reduce export capacity by nearly as much as US and when demand recovers everywhere, these two countries will reach their current export limitations again. It may be 2022 before this happens, and Qatar claims they are planning to expand exports further, but so is the US private sector. Here’s a secret about news articles, they have to make it sound interesting, it sells better. Hell, I’d sell better if I would write more interestingtingtingly.

If US private sector planned to build 15Bcf/d equivalency worth of LNG exports by 2021ish, to the tune of $10billion? $20billion? or more in cost of construction, then… these private US companies are going to do their damnedest to make sure, even with Qatar and Australia and Russia involved, that there will be enough global demand for them all to have a place to go with the gas. There is going to be competition, but no one wants to compete for $2/MMbtu. So, we’ve hit this bump in the road. The US hasn’t been sending gas to China lately, so there is really little to no threat as far a trade agreements. As far as my statement about Russia. If Asian and European demand get back to normal and some growth begins again, Qatar and Australia will not be able to supply China and everyone else with Natgas. Therefore China will have to play nice with the US or fill their natgas void with Russian gas. I don’t keep track of these international relationships, but right now it doesn’t even matter.

As for right now? Gas is boring… On top of that, it’s boring Friday and I’m home today since I worked Sunday. I have a lot to get done.

My position

UNG – 60% in with an average of $11.73

I still have zero confidence I will see $11.73 yet, so I have zero orders in to buy or sell UNG.

I want to share some other positions I have confidence in.

In my 401k: I plan to hold these for a while

  • SLB got in around $16 with 10% of funds – I reduced 30% of that position above $21, and added it back yesterday at $19 to be 10% in again
  • EOG – Same as SLB – about 10% funds – reduced and back to about 10% in this morning at $53
  • AR (Antero Resources) – 2% invested with an average of $3.17 – I would like to just hang on to this until I see what happens. I would stop out at $2, but not sure how long I plan to hold this.

Side note about my 401k account, I was holding SPG and SRC, 6% dedicated to each of these, I saw they were rising very fast and excited a few days ago. I am not sure about re-entry yet. Today looks good, but I want to see how stock markets react over the weekend.

In Cash:

  • BOIL – I’ve got maybe 50% of funds dedicated to covered calls at various levels – trading similarly to UNG, but with calls helping to protect my account balance, I would say it is fair but not good enough.
  • KOLD – I shorted and sold a single 7/17/20 put 60 strike. I’m liking this more than buying BOIL, interest is high, but so is decay. I also have to be much more careful about margin requirements. interest rate near 6% to short with Schwab.
  • LABU – Short 1 covered put here as well from 47P for 6/19/20 expiration. going exceptionally well, I am hoping LABU doesn’t drop like a rock, but slowly decays so I can slowly roll this put lower as time progresses. If it gets too far ahead of me, I might abandon selling puts and just let the decay take the shares lower – interest is 1.5% right now to short LABU with Schwab.

I hope this is helpful. I do eventually plan to start talking at least about my KOLD covered puts, because I believe in them and I think some readers want to hear more about that trade. Liquidity for KOLD is fairly low, and like DGAZ right now, it is hard to get shares to short (as in none available this morning). I might be able to call the trading desk and ask them to go out and get me some shares to short.

As for UNG, just hang in there. Slow can be good, no rush to try and manage things, wait for demand to recover I say. Good Luck and hope your weekend is safe and enjoyable

Oldinvestor