Morning Thoughts – Oldinvestor

The bottom is in… I still feel like I’m on a limb by saying this, but most signs point to this being the case. There’s a lot could ruin the bull run here; like production ramping up, really un-supportive weather, LNG crashing again.

I believe prompt pricing has some room to move. Sept coming up from lows just below $1.60. It would appear $2 should be what I would call the “magnet price”. The big news is LNG. LNG demand has risen above 4Bcf/d, and we all know about where it is targeting or will reach at some point soon enough. The market knows this as well, which is why there has been stair stepping move upward over the last 2 months, after lows were reached.

Comparison of NGU20/BOIL/KOLD from 6/8/20 to 8/3/20

Something that has been on my mind some, especially since I’m trading it, is being short KOLD vs being long BOIL. The arrows in the photo are close to where BOIL and KOLD will open today. I’m pointing this out because in just 2 months, the natural decay has whittled their pricing down by 10%. These ETFs have followed NGU20 since some time shortly after 6/8/20, the point of where I’m starting my comparison of the three charts. So it is not roll decay that is dragging down the price; it is raw decay and volatility. Granted, going short on KOLD, if I sold 100 shares at say $60/share, and the price went as high as $85/share, I needed to have enough money in my account to cover my butt when KOLD goes against me. Since I have survived, I am all but guaranteed to make money on the trade. I think I’ve driven this home enough.

So with LNG getting back on track, and production not (yet) ramping back up, pricing is just too low. That’s not to say prompt is going to $3, and winter is already at $3. I feel this leaves a relatively small amount of room for long sided trades. With this last move in natgas, I feel better about the idea of trading UNG again. I’m not willing to buy here, but I’m willing to consider it on a dip. I’m still holding 60% of funds in UNL and will continue to hold this, maybe through winter. UNL is certainly worth the patience for survival.

NGU20/BOIL/KOLD/UNL/UNG from 6/8/20 to 8/3/20

The green line is UNL and the pink is UNG. I don’t think I need to preach anything about this. I’ve been better to be 80% in UNL these last couple months than to be in UNG. Granted layering in UNG can offset a lot of decay, and will soon be the case again.

My positions

UNL – 60% of funds in from $7.4 – boring

BOIL and KOLD – covered puts

BOIL/KOLD covered puts as of close 8/3/20

Today is going to be pretty sweet again. I will not be covering any UNL or trading any UNG. I may make changes to one or both of my KOLD puts, stay tuned for that. These don’t require changes, and the 70 put probably just needs to expire and I cover the entire trade with a small gain. I’ll post anything closer to market open if I decide to do anything with my 55 strike put. BOIL is just there riding the wave; it will remain boring for… until it’s not I guess. Good Luck