Morning Thoughts – Oldinvestor

I feel like crap. I sold too many covered calls against BOIL, it’s getting painful right now. Covered calls are just like anything else, they work until they don’t. They have helped with my layering method, but I didn’t regulate my trades quite enough. Had I stuck with covered calls against UNG, I might feel considerably better about this week. I’ll survive and dig my way out as usual.

The frustration causes me to second guess myself in adding to UNG yesterday. I’ve added 20% more funds to my UNG trade, bringing it to 80% of my funds dedicated to UNG. LNG nonsense still has me on edge. If you haven’t read any other articles I’ve posted, here’s another on Australia: Global gas market ‘extraordinarily oversupplied’ and now hitting Australian exports

The article mentions the 41 cargoes of Australian sourced LNG still seeking a destination. Australia exported 101 cargoes in April and only 93 in May, but this is only an 8% drop. US exports have dropped nearly 15% from April to May. June will be far worse, and July is already shaping up to be equally as bad. This idea that Australia having 41 cargoes at sea is recent, but this fall in exports will worsen. The only good take away from this news is that it is old news. We don’t care so much about what happened in April/May; we want to know what is going to happen in July/August.

Here in the US apparently Cash pricing dropped as low as $1.38, a 21 year low as reported by Platts: Cash Henry Hub gas drops to 21-year low on weak LNG dynamics. Imagine that, based on LNG weakness.

Cash Henry Hub settled at $1.38/MMBtu on June 16, which is location’s lowest settlement price since it fell to $1.01/MMBtu on December 3, 1998. For context, the December 3, 1998, settlement is cash Henry Hub’s all-time lowest recorded settlement price.

S&P Global Platts

This storm is finally really beginning. Banks have finally had enough, prices are unbearable, and producers have already been suffering for years up to this point. I look to see more declines in production, at least I would imagine there will be some choppiness in production if cash prices are dumping like this. We shall see

My position

UNG – 80% in with an average of $11.23

I am back to waiting for what I would think the last major leg lower or a bounce here. Any kind of a bounce and I’ll be reducing. As usual, I will target my break even price of $11.22, but will take any bounce I can get right now. For example, if UNG bounces to $10.7 and I feel like it’s not going to make it to $11.22, I’ll reduce back to 60% there. We’ll see when the time comes. If prices just start falling again, I’ll wait for another 3% lower before adding my last 20%. I hope it doesn’t come to that, we’ll see. Good Luck