Morning Thoughts – Oldinvestor

This week makes me feel the market is ignoring fundamentals again. With this DGAZF mentality, maybe so. However, I am prepared for this. UNL is doing excpetional, and BOIL covered puts are hanging in there. Josh Heller and I discussed some the market and storage, as if the market doesn’t care about storage figures.

My thought on this subject is that LNG has stolen the spotlight once again. There is talk of LNG exports now returning to max capacity by Oct/Nov, and production has stalled out. This is why I like UNL, if this scenario actually plays out where LNG goes back to 9Bcf/d and growing, UNL will move higher, no doubt. Production has to stay where it is, and it may actually come down to the oil market and Texas… Barf. Oil… There are 3500 DUCs in the Permian and still building more… Appalachia who? There are frac crews that will work for food right now I’m sure…

For all we know, some producers are just waiting for LNG to pick back up in the next month and we’ll see production increase once again. “There is so much gas” said that jackass N5whatever is handle is on twitter. He’s right. No doubt, I’m long UNL and will stay that way until the market changes its mind. This may come a a surprise some day soon enough.

I will be patient. Storage won’t matter until it does; until then, it’s the LNG show. Speaking of which, there was a slight pull back in LNG feed gas yesterday. LNG facility storage was low coming into August, and I think some facility will have wanted to get ready to go back to higher output.

In the end I would argue to market has proven it isn’t worried about storage until it’s dire. Josh pointed out in 2018, the market was complacent about storage. Then in November, the market was shocked. Josh was right then and the same may be about to happen now, in and almost opposite scenario. It’s already close. The difference is, the market has already reacted pretty extreme to storage, and you might argue that speculators are just sorting the chips out. Big players that made money on the short side may be done for a bit. I don’t know.

I do know I like holding UNL for a long and shorting BOIL for a long term short. I’ll go back to the idea that as long as BOIL doesn’t get de-listed, I’ll be in great shape in 6 months. Position wise, I can survive about anything, even a 2018 like spike in pricing.

My positions

UNL – 50% of funds invested from $7.4 and waiting

BOIL covered puts

BOIL covered puts as of close 8/18/20
Covered puts Profit/Loss as of market close 8/18/20

This step backward in BOIL for me hasn’t brought on any more pain for my account. So far. The 50 strike could start hurting a lot more if BOIL moves much higher. I’m ready for this though. And the more volatile BOIL gets, the faster it decays. Ok I’ve got to go

Still waiting out this week. I have considered a butterfly or something in BOIL to take advantage of mostly likely volatility coming in the next few weeks. I”ll have to think some more about this. Good Luck