Morning Thoughts – Oldinvestor

If you haven’t heard yet, you’re living under a rock, but there was an event that caused unplanned maintenance to occur on a pipeline in the northeastern US. Search “TCO pipeline” and in the news and you’ll get many results from yesterday. I would like to have seen a stronger move in UNL with such strong move in prompt pricing of NG. Being that UNL is spread over 12 contiguous NG contracts, I must keep in mind it will not move nearly as strong as UNG or prompt NG pricing. The overall move in natgas has not changed, winter contracts did not move much on this news, because the TCO pipeline will be back online next week.

Ahh geez, I keep typing two spaces after each period. It feels as though that’s going to be impossible to break. Even as I type about putting two spaces, I still put two.

Anyway… My daily updates in supply/demand show the drop in production. Some gas will be routed around and still be counted as production, most will have to wait on repairs. One week of 2.5 -3 Bcf/d of lost gas isn’t going to change much. Prices will fall back in line with the sideways trend and the pain will continue. LNG is still suckin and production is still booming with a slight decline in dry gas that will be overshadowed by associated gas increases with oil. Barf!

So we wait. I’m considering shorting another 100 shares of KOLD in my cash account but I’m on the fence about it. I really like the following chart.

Weekly KOLD chart since inception

KOLD has been kept alive quite well from contango and the timing of the roll for KOLD. This might put things in perspective. one space damnit. Click on the image to get a better view.

Weekly NG continuous chart vs KOLD vs UNL

In the above chart you can see the comparison of continuous natgas prices in relation to KOLD and UNL. UNL has suffered and KOLD has benefited from negative roll yield. It’s beautiful. It makes me want to actually go long on KOLD the next time we see a big spike in the market. As long as the ETF is still around by then.

About those short shares. I tried shorting more when KOLD prices got to the 70s and 80s. If I wait, there will be no shares available to short since KOLD is more popular to short at the top of course and liquidity is not that great with this particular ETF (so there are fewer shares to short). I think this post has gotten confusing? My mind is elsewhere right now. I should cut it off.

My positions

UNL – 80% in with an average of $7.4

I was hoping to reduce back to 60% holdings in UNL at $.7.95 but this appears to be out of reach. I’m thinking I should reduce anyway… I think I’ll wait, maybe even spend my last 20% of funds on UNG if prices break down again. For now I’m going to wait to see how this week finishes out. As for KOLD, I’m short the 100 shares and 1 put. I posted this trade yesterday. I can post an update on the progress of the trade each day at market open. I’m going to look at my cash account and see if i want to try and tolerate another 100 shares. I probably will and I will sell another put near the money for 8/21/20 expiration. I’m not recommending this for anyone. Please keep in mind shorting is hazardous to your account and can be hazardous to your health. Good Luck out there

Oldinvestor

KOLD covered put position

KOLD covered put position as of close 7/7/20
KOLD covered put position as of open 7/8/20

I think I’ll keep tracking and sharing this trade. It should go against me soon enough so that I can share how painful it can get as well. I don’t want to only share trades when they are in the green. What do you know, no share available to short more shares…