Morning Thoughts – Oldinvestor

Natgas prices at Barchart.com click the image to go to the same list for free

Forward natgas pricing is taking a beating. Forward, meaning the earlier contracts to expire. My South Central theory just got a big boost this week.

Storage by region at EIA.gov click the image to go to their site

We can see that South Central Non-salt is at 92% of capacity. This is more full than storage gets most years at any point throughout the year. Other areas of the country are also not far behind. Many more weeks such as this and there would literally be no place to put natural gas.

Entergy.com outage map for Louisiana, circled is area for Cameron LNG export facility

Cameron is still without power. I can imagine someone with big data is sending someone to go drive around the area to asses what is going on. To think I was counting on there being outages here and there, now that LNG exports have grown to this size. I wasn’t counting on this. Good thing I’ve been so paranoid of South Central storage since it was brought to my attention.

Granted, South Central non-salt will most likely (like 99% chance) will not reach maximum capacity. But… it is the threat that will drive prompt pricing off a cliff. All the more reason to be cautious going long. I went long on UNG a bit too soon.

My current positions as of market close 9/17/20

I’m still big on UNL, I’ll continue to hold this until next year possibly. Maybe it will be the first long term gain I’ve recorded in 20 years. SLB is doing well and could possibly keep my account alive while UNG suffers.

So I’m out of BOIL! wow, I didn’t expect this… I did not cover these trades because they were at a profit. I covered because the market took a direction that will set me up for a better entry. When Cameron comes back online and prompt pricing is no longer under attack from storage scares, I’ll then give it some more time to come up from recently developing lows and wait for a point at which BOIL is starting to get deeper into the Hard to borrow category. I’ve learned there is a much better deal to be had, while still being able to get shares of BOIL to short. Remember I’m shorting BOIL with deep ITM covered puts just so I can get the shares shorted before they become impossible to borrow. This trade has little to do with making money on the covered puts. It’s a big investment that may take months to survive; but the payout could be 50% of the investment. I’ll take 50% gains ROI in less than a year. The market still must move in the direction I need to pull it off, so it may be a long wait for this trade to actually work. Right now I’m just happy to be where I’m at with what I’ve shared. I will be adding to UNL today in my bigger account that I normally do not share. Also, now that I’ve added money to my example account to convert it to a margin account, my UNL position is closer to 20% of the account value. The UNG covered call is roughly 50% and the SLB covered call is roughly 72% of the account. I’m on margin, so I’m beyond 100% of my cash value, I must be careful right now in this account. It’s more about protecting my ASSets. I hope everyone is a little more clear that was completely lost in Natgas. And I hope I’m not completely off base. I hope everyone has a great weekend.

Oldinvestor