Morning Thoughts – Holding

My positions as of per-market 1/12/2021

I’m still holding slightly long with 50 shares of UNL and short 10 UNG. My account isn’t really moving much. I want to hold these positions where they are for at least another week. I’m not sure what yesterday’s move was all about. I don’t really think it was weather… It feels like the market is about to go for a long, bumpy ride higher. I’m not certain of this, which is why I’ll be holding where I am currently positioned.

I will post anything that stands out in my pea brain. Right now, I’m waiting for any strong evidence worth mentioning. Good Luck

Oldinvestor

Morning Thoughts – holding

My positions as of pre-market 1/7/21

I’m up to my eyeballs in ignorance at work. It’s about to swallow me up.

Tip for life: There’s human speed, and there’s the speed some humans want everything around them to move at. On a general basis, that seconds speed is always 11, it al ways has been and always will be. Greed is a confusing, hard to control emotion for most people. It consumes their behavior to the point at which they cannot set it aside in order to listen to reason. For example you tell a person that Equipment B will only run at say 500 pieces a minute and they see it run at 580 for 30 seconds, they latch onto this idea that Equipment B will do 580 or why not 600 all day. Greedy does bring about certain changes that can be a good thing, just don’t be blinded by greed.

Anyway, I’m holding where I am. I’m lightly bullish still. I’m hoping to gain a little with UNG suffering vs UNL staying afloat. With such a small position, this should be good to watch with minimal damage to my account if it doesn’t work out the way I’d like. I do know this; this trade would have been perfect in October to now. Contango is not so strong now, so I may not get much from the idea of long UNL/short UNG. And it is possible, in an under-supplied market, that this trade could go completely against me. However; I’m still heavy enough on UNL that I would make money. It will be a learning experience in any case.

Today is EIA report, normal time (10:30am eastern). Good Luck

Oldinvestor

Morning Thoughts – Down to very little long

My position as of pre-market 1/6/21

I’m going to stay long biased on this market, but of course I don’t always want to carry a heavy long position. Starting out this morning, I’m down to 50 shares of UNL. I’m considering a small short UNG position to offset a little more. Why not simply sell down more UNL?

Natural gas Term Structure 1/5/2021 vs 12/5/2020

UNL, being invested across many contracts, you can see how it might do better, as these contracts are higher from a month ago. Yet, at the same time, UNG should be lower, as prompt pricing is lower than 1 month ago. The difference may not seem like enough to play the spread (long UNL/Short UNG), but over time, this can be the result.

UNG vs UNL June 2020 – 1/6/21 premarket

So with storage to a surplus, as prompt pricing reaches expiration of that contract, the price may fall because there is more than enough gas with no threat to storage. This happens enough over time, it has a tremendous negative impact on UNG, and less of a negative impact on UNL.

When UNG rolls to the next contract, it is 100% of the holding, and if the next contract is priced higher, even by a few cents, UNG rolls out to a higher price. You have to study the timing to see it, but the impact on UNG is negative more often that positive. This also give short biased natgas ETFs, such as KOLD, a boost.

UNL is always holding 12 contiguous contracts, so it only rolls about 8% from prompt to 12 months later. This could also have a negative impact on UNL, such as rolling out of NGH21 at $2.673, and rolling into NGH22 at $2.892. But UNL, more often, sees a positive impact, such as rolling out of NGJ21 at $2.688 to NGJ22 at $2.501. It’s all in the timing of the roll. If you don’t understand me, please don’t think that UNL is going to roll H contract and J contract this week; nor will they roll at the same time. You have a lot to study if you get that impression.

My point is, UNG is impacted negatively on a regular basis, where as UNL is more consistent with the long term market.

I’m out of time. I’ll plan to hold this new positioning for the rest of this week and maybe longer. Oh, and I could have just reduced UNL some instead of shorting UNG. I am going to pay 2.3% of my UNG short position in interest, so I have to at least beat that. Good Luck

Oldinvestor

Morning Thoughts – time to reduce

My positions pre-market 1/5/2021

I will be reducing, but not until the market opens. My account is showing a larger UNG profit than it should; my short call will offset some of this at market open. UNL will also gap higher at market open, so my balance may remain about where it is now. This being the case. I plan to roll my UNG call forward today and reduce UNL to 50 shares at market open.

This move is a not surprising, but is nice to wake up to. Other than a trend and the price considered to have gone too low in the first place, I’m not certain what would be pushing prices higher at this point. I’m content with my position and my little profits, Part of me is just ready to be out for a bit. I could just dump my UNG position, as it is very near max gain…. I will elaborate on that in a moment

EIA Storage Surplus vs Prompt Pricing

First. Keep in mind the pricing chart above. Prompt pricing is still well under the $3 bar, and this is what I would consider the ceiling for now. Technically UNG/UNL has a little more room to move higher still. Storage is still at a surplus to the 5 year average, so I don’t feel pricing will rush to move above $3.

So I’m reducing UNL to 50 shares at market open, and rolling my UNG call out by 1 week to 1/15/21. I should still add 10 cents in premium potential to the trade and I can still make max as long as UNG stays above $9 by 1/15/21. If UNG starts trending down, I’ll cover the trade. I think it’s safe to go ahead and roll out another week at this time. I’ll take it one day at a time beyond that. Good Luck

Oldinvestor

UPdate:

I dumped all my UNG because the options premium started getting away from 10cents to roll forward to 1/15/21 expiration.

updated positioning 1/5/21