Compared to the last post I made, UNL and BOIL are generating a bit of profitability between the two. BOIL’s price has slid backward, while gas has risen slightly, pulling UNL up higher.
Below is my positioning after selling 10 share of UNL. Most of my profits are still coming from trading around my core UNL position, but it all adds up. I’m just happy to see a clear distinction of some decay within BOIL from 3/25/21 to now.
So I had added the 10 share of UNL at $7.7 and reduced at $7.94 for a $2.4 gain, proving to still be the better way to make money at this trade. The decay of BOIL is working in my favor as well.
Anyway, that is all I have for now. I’m really out of the loop. I’m planning on production running too high; LNG will be stronger this summer; power burn will be weaker than last year but stronger than the 5 year average; pricing will kind of drift for now.
Here’s the latest for my Webull account. I did add the 10 shares of UNL. I’m thinking now, maybe I should have brought my holdings in UNL up to 100 shares total vs the 60 I’m holding. Now I’m thinking I’ll simply wait. I only want to make small changes and not disrupt my account balance over heavy trading.
I don’t have any previous screenshots in this similar price range to compare my holdings and account balance, so I’ll have to leave it at that.
Since I’m not planning on doing a lot of trading, I may step up all positioning, long and short to amplified the affects of the decay/interest. I will think on this some and get back to it later. For now I’m holding and expecting an uneventful summer with the exception of hurricanes and potential LNG disruptions.
I’ll end with this; the next moment gas jumps (such as a 3 day run up, or more), I’ll wait for the price to turn down a bit and add to my BOIL short position. This and possibly reduce UNL. This is about the only thing I’m planning right now.
I am still holding a large portion of the midstream equities that I posted a couple months ago. They have gone up and back down 3/4 of the up move. I will continue to hold these to make gains/dividends. A few of them I stopped out of and wish I had not, so I’ve backed up stops on the rest and re-entered a few positions. Though producers may be struggling right now, I think midstream still has a strong future, since most are fee based on flow and there is plenty of flow to go around. Oh, and it’s EIA day today. I do not trade around the EIA report, but if you do, good luck.
Here is an update of my positioning at this point. I dropped UNG a bit early… And now I am quite lop sided long on UNL. I do feel like gas could run down a bit further, and if so, it would begin to become a bargain. I’m thinking about adding to UNL. It already feels as though this summer will be about price affecting power burn and power burn affecting price. The two are more tightly intertwined than they ever have, if I’m allowed to say so…
As long as LNG and the WhuFlu don’t cause major problems, then power burn will be the hot topic. Renewables will be thrown into the discussion, because that’s the biggest growth area right now. Anyway, as I said, if LNG or other anomalies don’t sideswipe the market, Coal to Gas switching will most likely play the biggest roll in gas this summer. That being said, it could make for a boring summer.
I am personally more interest to see if Appalachian production can sustain the break-neck flow rate, all the while continuing to kill Legacy gas production change.
Appalachia Region of the EIA.gov Drilling Productivity Report
Last time Appalachia drilling slowed (2016ish), production growth slowed, but never reversed course. Stunning! Then production went on as though it was only going to double total output. Wells in this region are YUGE! What I have my eyes on, is Legacy gas production change. The amount of gas will indeed decline with time and size of the gas fields. As you gain more total wells, you will gain more losses simply due to the number of wells. But!… If you aren’t drilling/completing more new wells, then there is plateau in there somewhere.
sad to say there is a lapse in completions data for 2016/2017… I don’t have time to find a fix… I am more interested in the last few year anyway.
So except for a surge in late 2018 to mid/late 2019, completions have been mostly under 100 wells/month. Total production has continued to grow while legacy production change continued to move backward, until late 2020? why the sudden drop in legacy change? Has Appalachian production growth capacity finally hit a brick wall? Did Legacy change improve during 2019/2020 because production was squeezing harder on legacy wells and it’s going to catch up to them now? Will the sudden drop in legacy production continue much further? I want to watch these things. Other regions have the same issues to deal with, it’s just that none have been so surprisingly strong as Appalachia on a per-well basis.
Then there’s Permian, which has plenty of room to out grow the market again, if Oil producers decide to start dumping gas again to sell oil. And then there are efficiency gains that continue to happen in drilling and completions; when will that plateau?
On that, I’m out of time. I want there to be a gas shortage in 2022, and to make millions on the move. I just don’t think that will happen. Mainly because I won’t take the risk, and two, the market isn’t going to get out of control in a bullish manner. Is it good to be bullish right now? I would think that depends on your scope of the market. I’ve backed up and become more macro. Maybe I’m just using that as an excuse to stay bullish. If I stay bullish long enough, eventually I’ll be right! If Appalachian production finally plateaus, I might just be in luck.
Oh, and I want to add to UNL today, but the market continues to see new lows, so maybe add 10 share of UNL today, if I can get them below $7.7/share. I don’t want to add more than this, as the market may go to $1.5 yet. Taking it slow and boring! Good luck
First, here is an update of my positions and account balance. My account balance is suffering along side the weakness in natgas pricing.
I believe there has been strength in production, and this is not going away as oil is back to driving associated gas output higher. Already! It is apparent that even a slight increase in production is not welcome. Prices were below $2 a year ago, so the deficit to the 5 year average is priced in. It’s been a year… geez
UNL will be below $8 today, I am a buyer.
Instead of buying UNL, I am exiting UNG. I am shifting away from shorting UNG, and more toward BOIL. The hard to borrow interest is far higher with BOIL than UNG, but so is the decay.
Since UNG has a tight Bid/Ask Spread, I exited now, at $9.47/share.
Now I’ve exited UNG, I will hold here for a bit longer. If the natgas prices continue to tumble, I may exit BOIL. The original plan was to hold the short position longer term, but some opportunities are too good to pass on. Instead of increasing UNL, I will reduce BOIL. It will be a while yet. As for today, no more moves. I’ll wait now. Good luck
I don’t really have a lot to say, I was looking through some screenshots of my positions and found when my account balance was similar to my current balance. Just thought it might be worth sharing. The overall market currently is lower, and I’m long biased on the trade, so decay must be working a little as my balance is 47 cents away from my March 3rd balance.
The Top image is the trade from March 3, and the next image is from early this morning (March 9). I may be splitting hairs, but I don’t have much else to point out. I just need to give it more time I suppose. I do half expect the market to move fairly slow, and possibly lower from here. I’m already watching for a a point at which to buy more UNL. Patience though; it seems the market is still heavily supplied, and if Oil prices are nearing $70/bbl, the areas of Texas will be back to paying to get rid of gas in order to sell the oil. Maybe they should pay residential/commercial/industrial recipients to take it…
Here is the same timeline from March 3 to now. It doesn’t tell much. I do have a line marked on the chart from when I first shorted UNG.
Ok, From Jan 6, 2021 to now; this would be long UNL, short UNG only. UNL seems to be beating UNG at this point. It is only by a small margin. By my rough estimate that I needed 1.8 times the amount of money invested in UNL to help balance out a UNG short position.
I shorted $95.7 worth of UNG on Jan 6, or 10 shares.
UNL was at $8 at some point that same day. So 1.8 times the $95.7 of UNG = $172.26, divided by $8 per share = 21.53. I’ll round up to 22 shares for long biased trade (cost of $176).
Based on the latest values of on Tradingview, UNG is at $9.95/share and UNL $8.11/share
UNG would be at a $3.8 loss while UNL would be at a gain of 2.42.
I’m still at a loss overall
I’m seeing now on the hourly chart, UNG is still at a gain to UNL, plus I sold UNG at a lower price than shown on the chart.
If I adjusted my values of entry (UNG to $9.74/share and UNL to $8.01/share), then UNG would be at a $2.1 loss and UNL at $2.42 gain. Bid/Ask really took its toll on this trade, since we are splitting hairs that is.
The Bigger point!
A bigger point I wanted to make is the interest. UNG has fallen under Hard-to-borrow ever since UGAZ was delisted it seems. the rate has been around 2.3% annualized through Webull. Schwab has a better interest rate, but I’ll use Webull’s rate since that is where the trade is being held. I’m sure there is a calculation somewhere to officially tally the interest, but I’m going to wing it with 365 days in a year and count weekend days. 2.3% divided by 365 would be is 6.3^10-5 per day; multiplied by 61 days = .3843835% times roughly $100. Since UNG has been up, my short position would have been valued at higher than my entry. From the hip I’m going to say the value was $100 and the interest that I’ve paid to Webull is roughly $0.38 since Jan 6, 2021, as of today.
Sooooo…. Even if I got a perfect entry and was up by 31 cents this morning, I would be down by 7 cents due to the interest that I owe to Webull. Hmmm, after looking through my February accounts statement, I am not seeing anything about interest paid, margin paid, hard to borrow…. Anyway, my point has been made, it has not been a good 61 days for UNL vs UNG. There has also been low contango in this same time frame. Had I taken this trade the 6 months prior to when I did, I would have undoubtedly made money on decay; that is, had I not gone too heavy on UNL.
ok, I’ve successfully turned a quick update into a long drawn out rambling about 1 trade. I gotta go do real work stuff now. I will be watching to add to UNL, but in no rush as I’m already long biased. Good Luck