Looking back, had I held UNG, I would have hit my break-even and reduced and be layering back in. UNG really is a better tool for me personally than UNL. UNL is so slow and the liquidity sucks, so it doesn’t really move with NG as well as I’d like. It’s like there are 10 market makers with terrible bid/ask offers and a real trade comes along 3 times a day…. I think some days all the trade volume is by 1 person and 1 market maker.
I’m tempted to switch back to UNG, but this would be a mistake. I still believe there is the slight possibility that South Central storage gets flooded with gas to the point it won’t get filled to the top, but it will cause market chaos to prevent getting filled to the top.
Nothing for me has changed this week. I’m still waiting. I should be excited, because the market is building and preparing to change how things are done, but it’s slow from my perspective.
UNL – 80% of my max comfort with an average of $7.4 – waiting to see if it takes a shot at $7 or goes back to $9-$10
BOIL and KOLD – 1 covered put with each.
Things are just slow right now. Find something new to learn. I’m learning about wiring harness connectors because I want to build a harness that I can sell to someone for their old car/truck that requires not electrical knowledge and not cutting/stripping/crimping required. I even had the domain, ExactHarness.com. The site is not hosted yet; I’m still learning and don’t have anything to offer yet. as for Natgas, I’m waiting. Good Luck
Not much has changed. I don’t have any updates. I want to say powerburn is weak compared to CDDs, but this doesn’t seem to be true looking at comparisons at RonHenergy.com
In fact, the last 6 weeks comparison to previous years, powerburn is stronger than ever. Industrial is an easy target here. Industrial consumption continues to be weak and weather isn’t going to make much difference. So much for making a quick scrutiny argument…
Being that little has changed in the market, I’m still waiting for a new low in prices or signs of LNG recovery. Platts had an article yesterday, they think recovery is “on the horizon”. We’ll see. They make mention of September LNG export cancellations being common knowledge next week.
UNL – Gonna change how I say this – 80% of my max comfort in with an average of $7.4 and waiting
BOIL and KOLD – short 100 shares each and short 1 put each.
I’m starting to see a little pain with both of my covered put positions. BOIL is technically ahead, but since I am the only person interested in 90 strike puts of BOIL, the bid/ask spread isn’t ideal. Good thing I’m in this trade for long term.
I’ll be sure to share these two position at market open, as long as I am nearby. Good Luck
The overall supply picture never really changed all that much the last week. Canadian imports over pipeline increased to make up for some of the disruption in the US. This is still a large disruption, one that should be resolved this week. As Josh Heller mentioned to me, we could be seeing summer draws on storage if LNG were to swing back to full capacity. I have see 1 summer draw on storage. I think it was 2016 and gas moved $1 higher in a matter of weeks, and stayed there.
Thinking back, I remember reading, watching news of the oil/gas markets in 2014/15 when everything was crashing, but I wasn’t trading NG or ETFs. I was not in tune with how the market felt heading into a drastic price situation like now. I started trading UGAZ after things hard already started to turn around. Gas supplied had yet to get on the decline, but the market had decided it was time for relief. So it was easy to be on the long side of the market in 2016. As for right now, there is still so much gas, we’ll only see short swings above $4 NG.
As for the current market, still getting temporary relief from a pipeline shut-in and a boost from weather. I’m still long on price but very pessimistic about Natgas due to the ability for producers to quickly turn on more gas. Canada has shown they are good for an extra 1Bcf/d in an instant. Many areas of the US, we know are good for more; few, if any areas are bottle-necking due to pipeline constraints. I’m still double spacing between sentences.
And there’s a call to some more equipment that no one else can seem to get running.
I took 3 calls and… nevermind
UNL – 80% of funds in my example account invested from $7.4 – waiting
My BOIL and KOLD positions as of close Friday
My BOIL and KOLD positions as of this morning
Ok, so I’m shorting KOLD with a covered put because I like where the price of Natgas is for scraping in premium from the short put. I’ll continue to roll this put out as long as I believe natgas will continue to kinda hang in this range. Covered calls/puts are generally for collecting premium against a slower moving target. I like the covered put because I will eventually make good money being short the shares of a leveraged ETF from decay, and collect premium while I wait. I’ve found it may be more advantageous to roll the put when the underlying swings near the put strike price vs waiting for the put to expire. If I wait too long, the roll is not as valuable in premium difference between expiration dates.
As I have done last week, I also rolled the put down; leaving myself more room for the underlying shares to fall and make money on the short share position in KOLD.
On to BOIL… I think I would be considered quite paranoid if I were to take that 90 strike covered put just for the premium. I will make a small amount on the premium of selling a 90 strike put for a $2 max gain, but I could have sold a 60 strike put, still have stayed protected and made like $6 in premium. I’m holding out for another reason.
BOIL and KOLD are small players in the ETF world. They are no where near the popularity or liquidity of UGAZ/DGAZ. This means it’s also hard to get shares of BOIL or KOLD when the prices is more desirable to short. As I’ve experienced lately with KOLD; I can’t seem to get 100 more shares to short above $65 so far. I would say…. I’m still double spacing between sentences. I would say that I’ve gone to the extreme, but I’m well protected with my 90 strike covered put position in BOIL. I protect my BOIL short if the share price moves strong against me. I have a small cheat sheet that I use to project roughly ( very roughly) where the price of BOIL/KOLD/UNG will land if NG moves to certain price.
This is a screenshot of potential price projection of ETF prices when NG prices move to a certain area. Basically if Sept NG would have to get near $3.25 for BOIL to go to $90. Also November NG contract would have to get near $4 and Jan21 would have to go to nearly $5 gas. That’s pretty extreme. You’re seeing a screenshot of my sheet, it’s just simple math, if NG moves .25% higher, then I assume BOIL moves .5% higher since it is 2x the % movement. It is not perfect, but to project this far out is too hard anyway since BOIL is going to roll forward as well to future contracts over time. This is why I’m projecting the three contracts that BOIL should roll to over time. I’m not saying this is where the prices will land. I do believe I’m giving myself ample room to short BOIL at this point.
So i chose a 12/18/20 expiration, this because I want NG prices to jump early winter. If nothing happens I make $2 and cover the cost of the interest I’m paying for the short shares. If the price jumps by expiration, I can choose to roll the put or let it expire. If I let it expire, I collect $2 for extrinsic difference between my short shares and the short put. Beyond that, I have the option to enter the market with a short position in BOIL wherever the price is at when the put expires. So if BOIL goes to $55 by 12/18/20, I collect premium that can go toward my short position and it’s basically like shorting BOIL at $55. Why don’t I just wait? Because I might not be able to get the shares at $55 to short. The option will be mine when I get there and I can roll again if I think the market has more room to move higher.
I’ve got to go. I hope that was a half clear explanation and if you think I’m crazy, I’m good with that. All my positions are in wait mode right now. Good Luck
I made the mistake of reading work email early this morning. There is a problem when a speed on a servo drive, but the drive is being told to run slow so I need to go take a look at this soon. Sounds like a gremlin problem. You know… The kind everyone is having trouble solving.
Extremely bullish weather and pipeline disruptions are great, but both temporary. This should alleviate some storage concerns though for now. Production did still ramp up just before the pipeline issues, so look to be stepping right back into that soon enough.
UNG – 80% in with an average of $7.4 and back to waiting
KOLD -short 100 shares and short 1 put
Ok, so I rolled my KOLD put from 7/17/20 to 8/21/20. I rolled out and down, meaning I bought back my 60 strike put with expiration of 7/17/20 and sold a 55 strike put with an expiration of 8/21/20. I’ll show the whole thing here.
Originally I sold my first KOLD 60 put for $8.5. So if KOLD is at $60/share or higher on 7/17/20, I make max premium on the put and a little on the share price as well (because I shorted higher than the current price). Because I have rolled down the put, the underlying price can fall, making me more on the share value, and still make some on the 55 strike put. I could have waited to roll this put and made more in premium on the 60 strike put. If the underlying price moves quickly away from this range near $60/share, then the premiums start falling quickly and the roll isn’t as advantageous. To understand this more, you need to learn about intrinsic and extrinsic values, and how being “near or at the money” can help with maximizing selling premiums. To some of you, this concept is already understood and that is great.
So I had I rolled out to 60 strike put with expo of 8/21/20, I would have gotten more premium than 55, but because I rolled down to 55, I have more run on my short share position to make more. Making more money with premium is good too, but you must keep in mind a covered put limits max profits by what strike price is chosen. So by rolling down, i open up the potential to make more if the underlying value will fall. The put premium comes in by the underlying value staying elevated, and decay making me money over time. When the stock price falls, the shares make money, but both can only make so much and I’m really betting that I will make more money on time decay than on a big move in NG. Since KOLD is near the top, and it kept alive by contango, I feel it’s a great time to scrape decay and keep rolling, anticipating a slow move lower at some point.
So this shows that I could buy back the put right now for $8. I sold it for $9.66, so $8 is a little far fetched, I probably would have to pay more to buy the put back. Also what is not shown is the difference in my original sale of the 60 put for $8.5 and buying it back for $6.9, which I have scraped a profit of $1.6 or $160 profit minus roughly $1.3 for commission. Lets assume I had to commit $10,000 to this trade since I need to have enough to cover KOLD moving to $100/share. Remember I’m short so if it goes up, I need to be able to cover that. So in 1 month I’ve scraped 1.6% against that and I could cover the rest for more of a profit, but that’s what I’ll count so far made. If I could possibly make 1.6% every 30 days against a trade, I’ll have made roughly 19% a year on that trade. I should find a better way to display how I’m tracking my profits and position. I really like this trade and will continue to track it here. I’ll skip the long drawn out explanations in the future.
That’s all I have time for right now. I have no plans for UNL right now. Also; now that I’ve rolled KOLD, I will be in waiting mode for that trade as well. I’m sitting tight. I do have 20% of my funds in my example account to trade and will hold on to see if production goes back to crushing NG prices again, and probably buy UNL or even UNG. It will be a while though. Good luck
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.
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.
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.
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
KOLD covered put position
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…
I think it’s a good idea to start shorting both KOLD and BOIL. I do not have a recommendation as to how much, that is wildly inappropriate. I was about to short 100 shares of KOLD in my main cash account about a month ago at $60. I got 100 shares so I could sell a put against those shares. I have not been able to get any more shares of KOLD to short from Schwab since that day.
As of yesterday’s close, I’m ahead on both the shares and the put. So this trade has worked out well. I’m in the process of trying to roll this put out and possibly down, as in buy the current put back and sell a 60 strike or lower put for 8/21/20 expiration. By rolling out, I raise the amount of premium that can be sold for that put. By rolling down, I sacrifice the amount of premium I will make if the share prices ends above the strike price; but this also allows me to make more money on the direct short. The primary reason to short the shares of KOLD is to make money on the decay over time. I want to keep rolling the puts down over time so that I’m able to potentially make money on both the put premium and the decay of the share price. I understand the whole dynamic well now, but it is very difficult to explain. It may be better to search “covered puts” to gain a better understanding of this. I will keep this trade alive as long as the underlying value doesn’t get too far below my strike price.
I particularly like covered puts on KOLD because NG prices are at/near bottom to give a short position in KOLD a higher win percent. I like selling puts against my KOLD short because contango should keep the trade alive longer and help to actually keep KOLD from decaying too fast. If the underlying price of KOLD move in my favor too fast, of course, then not enough time will be allowed to make money on the decay of the put premiums. I still make money, and I might even get assigned and collect profits early… I want to keep the trade alive by collecting premium from the puts and rolling them out/down so I can keep generating “income” from this trade vs trying to a make a quick profit and getting out.
The reason I think it could be a good time to short both BOIL and KOLD is the market is still in a bind with LNG demand lacking. I’m not really going to short BOIL at this point because any news of LNG recovery is going to give natgas another boost. Europe is starting to get their storage under control, and if LNG increases any, US storage will not be feared as hitting max capacity. I’ll sit tight with my UNL and my KOLD covered put.
As for gas fundamentals, production is confirming a bit of a recovery. I cannot say from what part of the country, but I would guess somewhere in Texas. It is possible the Bakken has been hit so hard, maybe they are due. Just keep an eye on that South Central storage figure this week. The overall US figure could beat the 5 year average and South Central still suck. Just be aware of that. Common sense tells me that South Central can have some influence on the market still if it continues to suck, but that influence will break if storage in that area is relieved.
I can see how the market would get on a bit of a run here, it is due for that. I remain paranoid as usual.
UNL – 80% in UNL with an average of $7.40 – order placed to reduce to 60% at $7.95
I’ll keep my same order to reduce my position at $7.95. It looks as though the market is leveling out the curve. Aug/Sept/Oct/Nov pricing is up while the rest of prices are in the red. This isn’t so helpful for UNL, but things will all even out in the end. As for KOLD. I’m short 100 shares and short 60 strike put. I would like to roll out to 8/21/20 expiration fro $6 credit or maybe settle for $5 credit and roll out and down to say $58. I may have missed my chance since KOLD is currently trading closer to $54. We shall see. Good Luck
First off, Josh Heller posted on July 2, his post will be just below this one if you’ve not read it yet. Second; I’m still trying to keep my posts short so lets hit on high points.
I’m actually not that informed this morning. I do see that production is up considerably, like 1.5+Bcf/d. That’s quite the rise in supply. I also see that the weather forecast is still predicting super hot. LNG exports are also at lows still… So Weather being the only bullish factor, it would seem there is something more technical about the market. Maybe a seasonal shift in trader mentality that I’m not aware of. I haven’t been reading this weekend, and it doesn’t appear much has changed.
I’ll stick with the drop below $1.5 was just overdone. It was time for a bounce. Fundamentals are still quite weak to support $2+ unless market makers believe we are approaching a hot summer and then winter right behind that. With production being suppressed this long and then falling off a cliff as it did, LNG may not be as bearish a factor soon.
Either way I’m sticking with the idea that there is still plenty of supply within the US and Canada. Last week’s EIA report signaled that with hot weather, there isn’t an oversupply. With current forecasts, the supply/demand factor will only “tighten” meaning the market won’t be so oversupplied, supply and demand will be closer together. I look for anything at this point. I think this run could continue a bit more, but remain cautious. I really need to be looking at the chart and making a decision to reduce back to 60% of my UNL holdings or not.
UNL – 80% in with an average of $7.4
I will try to look this over and update this post and post to Twitter if I make a move. Good luck
Update: I’ve place a sell order to reduce my holding from 80% down to 60% in UNL at $7.95. I think this is reaching today, but there was 1 transaction at this price so we’ll see.
I don’t have anything new today and probably will not have anything new for tomorrow (Friday). It is rare that I skip or miss a morning post, but now is a good time for it. There really isn’t much to say. I feel I should mention the weather because I haven’t said it before now. The weather forecast is extremely supportive of summer demand right now. I believe this is being overshadowed by the battle between LNG and Production. If Covid19 doesn’t improve, the situation won’t either. But… This could create some range bound movement in the price. If I didn’t have a soon to be 7 year old to hang out, I might even try day trading a little or just layer in and out. His birthday is in 2 days so we’re just gonna kick it and I’ll ride UNL without watching.
Good Luck everyone. I wish for you to have a fun and relaxing weekend and 4th of July.
I keep hearing this same report 20 times now. Shell is playing a numbers game to make things look horrible for the industry. Not that things aren’t horrible for the industry, but… 22Billion in “write downs”. I’m not entirely certain of what that means, but it certainly isn’t operating costs in the last 3 months. I’m betting it has more to do with projected costs and “proven reserves”. I also hear an LNG tanker and car carrier collided, that’s scary but almost funny. Australia is not making enough money selling LNG, bla…
In short, the narrative is still LNG vs Production. Both are on edge. Associated gas production will still have some impact if oil recovers, which doesn’t look to be happening for a while. Dry gas is, in fact, going to continue to decline until prices support a reversal. The LNG global market is still flooded with boats looking for places to offload. I don’t know which will happen first, but the longer time drags on the greater chances are in favor of an LNG recovery.
As time goes on, and drilling is near non-existent, production falls behind on just maintaining production levels where they are, let alone expand. As time goes on, demand grows from low prices. Covid19 will most likely either evolve away from something so deadly or humans will have found new ways to live with it. Either way, people can’t seem to keep their hands off of each other and making babies, so demand will grow as populations continue to grow. Without some expectation of demand, supply would not have a reason to exist. I’ve got to stop
UNL – 80% in with and average of $7.4
I’m still waiting for the next big move. It may take a while now that summer demand is picking up, prices may actually hold here. The longer the better for a rebound in the next year. I may be holding UNL that long at this point. Good luck