Morning Update – May 15, 2020

I can’t help but get the feeling Saudi tankers are in play here. 50MM barrels of oil, to be unloaded in the US. I don’t know how much more than is normally sitting offshore, but it is being made to sound like a lot. Probably because it’s a lot. So this is bullish because it puts pressure again on oil storage, causing a surplus to continue to exist and suppressing oil prices (some anyway) and putting pressure on oil production. All that goes back, any influence to suppress oil, will at least be perceived to suppress natgas. That’s my story but it sounds a bit thin…

Natgas production still appears to be holding the the trend of declining output. It’s really quite fast to drop 5Bcf in just 6 months. Of course it seems 3Bcf (over the last 1.5 months) could be related to the pandemic. I’m seeing production cuts still lasting, but also hear of permits in Texas have been increasing for drilling. Some Whuflu related cuts will most likely come back online, but if prices continue to fail due to LNG cuts, the market will find other places to cut production. All the while keeping prices down, volatility up, and options premiums a little to a lot higher. That being said, I’ll continue to reduce my holdings when reaching my break even price, only taking profits on smaller portions, but staying ahead of price destruction.

My position

UNG – 40% in with an average of $12.36

I had been wanting to hold 25%-30% of UNG for a turn around in the NG market, but I’m letting go of that for now. I like to think I was mostly accurate about the pandemic and LNG exports falling. I will always feel like I need more time and more data to a better job of trading. Either way, I’ll take profits and reduce to 0 holdings more quickly this time around. I’m placing a limit order to reduce one of my 10% layers at my break even price of $12.36. The market may just be giving back because of the strong move this week. The oil tanker thing just stood out this morning. We are still waiting to see how LNG exports shape up. From a technical standpoint, I’d say prices have bounced, but it’s looking to consolidate heading into next week. So no reason to make a move yet. I’ll keep my 1 limit to reduce if UNG can just happen to get to $12.36. As for Oil. I’m interested in selling that DBO covered call, but it seems I’ll have to start another account. I’ll check on that, but am in no hurry to change things around just to sell a covered call. I can place that order in my other account again. good luck

Oldinvestor

The Heller Angle

Joshua Heller is a personal friend of mine. I’ve been trying to drag him into helping me for a time now. I’m going to start including comments from him as often I as I can keep his attention!

5/13/20 around 3pm Est time.

Based on Price action at 3pm EST, it looks like margin calls have forced the last of the ‘weak hands’ out. NGN20 July low was 1.802 on 3/18 vs 1.838 low today and has already bounced back to 1.874 as I write. NGM20 June has already made a new low today. One of the things I like to look at for trading purposes is the straddle price ATM (at the money), in this case the closest to July is 1.85 and trading at a price of approx 0.34.

Since I’m bullish, I would look to sell put spreads below 1.50 at a minimum as this would get me below the low from June (so far). An even safer trade is 1.5 straddles away (0.34*1.5) 0.51 or approximately 1.35. That is where I would choose to sell puts. Note this is for summer trading, in the winter I would want to be more than 2 straddles away and would be especially careful on the upside. 1.35 / 1.20 put spread is currently trading for 0.011. Including commissions of $3 per contract, this trade would net $104 vs risk of $1396 or 7.4% if the trade expired worthless in 43 days. When I saw some strength, perhaps closer to 2.04 (200 SMA) and up to 2.10 is where I would try to sell a call spread to capture both sides.

5/14/20 update: 10:45 Est time

NG price action likes the storage report at 103. It is slightly bullish to estimates 106-110Bcf. I would continue to sell NG put spread like the one yesterday, I consider any spread above 5% worthwhile due to thought process of compounding on an annual basis (astronomical). Could potentially also move the strike up from 1.35 / 1.20 to 1.40 / 1.25 if someone felt the return from 1.35 / 1.20 is now too low. I still want to see July rally to 200 SMA around 2.04 (currently 0.15 away) before I would be interested in writing a call spread.

To be continued…

Morning Update – May 14, 2020

To help with the idea of how much is 30 loads of LNG

US LNG export volume and number of loads per month at RonHenergy.com

This is the total number of loads and how much gas was loaded each month onto boats.

I don’t really have time to add to this, but LNG is/has now been officially highlighted and maybe the main reason for the recent fall in NG prices. I’ve also been giving credit to the bounce in oil. Everyone gets all excited that oil is crashing and it’s going to drag down production, and associated gas is going to go down with oil. That’s all hype until it happens. I’ve heard a lot about oil companies cutting back, but I haven’t heard numbers for associated gas and it’s not something that is easy to organize all these numbers. I’m just saying, everyone got a little too excited, even I go hooked on that idea for a bit. Now everyone is getting excited about oil bouncing back and gas is going to suffer; supplies will be back up and so on. This may not be so true either. Oil demand is recovering, but the damage has been done; oil production may bounce back some, but future investments in drilling have been shot in the food for both oil and gas. Gas has been a longer time coming because prices for natgas have been suppressed for quite some time. US demand is already showing signs of life; the problem circles back around to LNG exports.

So I have two thoughts on all this. US demand will probably recover quick, if it has not already (mainly because it never got hit that hard to start with). I don’t think the immediate supply cuts are enough to offset the cuts in LNG exports, this causes the market to clearly go back to being over supplied. Also, storage is already near 400Bcf over supplied as it is (vs 5 year average). This is the deciding factor. I seem to lose track of this from time to time. All roads lead to storage and how well the market is managing storage. We have plenty of gas, and plenty more coming in than going out. Also it is build season, so if the market appears to be building faster than normal and storage is far over filled already… you get this idea?

The LNG factor is the hinge pin. As soon as we believe LNG will get back to some normality, and the exports will stop declining, the market will decide to balance out. Depending on storage figures are compared to the 5 year average at that time, will determine if pricing holds where it is, bounces around, or decides to trend up. So, as usual, I started going long too soon, natgas is not at risk like oil as of yet. There is still enough demand, prices don’t appear to be wanting to go to zero or negative. I will remain cautiously long.

My position

UNG – 40% in with an average of $12.36

I will not buy before the EIA report and my last purchase price was $11.26. So I’m in not rush to layer on. I’m content with my average. Be patient. Good luck

Oldinvestor

The world needs gas, LNG demand will need some time. Someone on twitter mentioned gas storage is full in other parts of the globe. Just like in the US, storage will need to be used up a bit, and our dealing with the pandemic will determine how soon. Right now it is too soon to know. again, Be Patient….

Morning Update – May 13, 2020

I had gotten billed for some hosting for another website my wife and I manage, heifertrailrun.com. I migrated that site to the same hosting as this site to save some money. While on text with the tech, he hooked me up with some changes to make this site run a little safer? I feel at least up to par now.

Before I get a call; it seems gas is testing lows. Without more major melt downs in LNG, I don’t think we’ll see a break for new lows. Mother….. someone wants something already. I don’t get paid enough for this shit. Relied upon as if I’m an engineer without the benefits. I may be back. I’m interested in buying on more weakness, but be patient today.

I see a combination of LNG exports are still weak and looking to get worse. Production cuts are in, but maybe there are more to come. What’s bearish is that we don’t know how much will get cut and for how long. If Oil is going to bounce back, and LNG exports are going to continue to weaken, this leaves a larger than normal unknown amount of gas balance. As in we don’t know how much supply or demand will be cut or rebound going forward. It’s a bit more of a gamble at this point eh? Then there is weather. I’ve warned weather is turning to be more the norm. Now we will have a true picture of demand without extreme HDDs in play. This is bearish on the surface because demand will drop. Seems I’ve also heard cash price has fallen, this will help drag prices for June lower. So it may take more to pull out with a gain.

holding 30% of funds in UNG with an average of $12.73

gotta go. Be Patient today. good luck

Oldinvestor

Morning Update – May 12, 2020

I cannot sit down for 5 mins, another call already

holding the same UNG, I’m interested in adding. I need to look things over first.

I’ve added to UNG with roughly 10% of my funds at $11.88

I’m now holding UNG with 30% of my funds with an average of $12.73. It’s been a busy day. It was a good day to wait to add.

Oldinvestor

Trying to convert my account to margin trading. clicked on it. and…..

that’s it. I guess I can’t trade margin without applying to a new account. I don’t feel like this crap right now. I’ll check back when I’m in a better mood.

Morning Update – May 11, 2020

Theme parks, movie theatres, fast food, larger social event, and maybe bowling – all above my threshold of risk vs reward. I cannot imagine going to a theme park right now… All these people lined up to get food, served by some kid. Might as well line up for hugs.

I have a couple guys I’m supposed to baby sit this week at work… *blank stare*

My positions:

UNG – 20% in with an average of $13.15

Friday, right before market close, I bought more UNG with 10% of funds. I think it was a bit rushed, but it is UNG. Despite LNG weaknesses, natgas prices are super low by most views. In the next couple of weeks, US temperatures will be close to the norm HDD/CDD wise. This will give a more true picture of any real weakness in demand. I t appears industrial is already recovering with many states lifting work restrictions. The only way I know to play this trade, is based on low prices. Pricing is so weak, much more and gas producers are going to be crushed. Prices are so low, there is no competing pricing, everyone is losing. So stay on the long side and trade in small amounts since moves are relatively big. Unless UNG makes another large move up/down, I’ll be waiting today. I would be interested in buying at $12, or reducing at $14

I am still awaiting funds to clear my account to trade covered calls. It may be late this week.

Good luck

Oldinvestor

Morning Update – May 8, 2020

Well as usual, I’ve forgotten that most brokerages require margin account to trade options. This also usually requires $2000 minimum in the account to open/switch to a margin account. So my $1040 is not quite going to do it. Granted, Webull will allow buying of Calls and Puts with a cash account. They did come back and approve me for options, after a encouraging message, they also gave me real time options data for 1 month. I don’t feel the need for real time data on options since I’m going to place the order way in my favor and slowly creep it down until the order fills. Since I want to enter a covered call trade against DBO (yes, I still favor this trade), I have to apply for margin. This means I have to fund the account with more money.

I haven’t spent any of my “stimulus” money, shame on me. I’ll go ahead and send $1500 more to Webull and apply for a margin trading account. Next week I’ll be showing how I make the DBO trade within my Webull account. Please keep in mind this is for learning (and entertainment) purposes only. I’m not recommending this trade to anyone. I’m not an advisor of any kind, especially not financially. I still save far more money from working than money I make on the market.

As for gas, I did buy a little UNG at $13.65, way too soon. I knew it, I did it anyway… Since prices are now closer to a reasonable buy for June, it sure looks tempting to add. July does not appeal to me at $2.095/MMbtu. Granted that is dirt cheap for gas, but doesn’t mean anything if LNG exports are heading for the cliff. Storage is up and the market is trying to swing back to being over supplied. It’s a good situation to wait. I may decide to add late today, but right now I’m not so interested.

My positions:

UNG – 10% in at $13.65 – barf

DBO – waiting for margin and funds to enter covered call trade.

It’s Friday. I’m still excited I polished my account up to get into the green by a reasonable amount. No rush to lose it. LNG being a big topic right now, July could also fall to $1.85. Good luck, be patient

Oldinvestor

Morning Update – May 7, 2020

Well I don’t have a lot to say this morning. I did add 10% back to UNG yesterday, like a moth to the flame. I’m good with this choice.

Something that has my attention this morning; Shell sold gas leases to National Fuel Gas Company (NFG) for a bargain. Does this make NFG worth investing in? I have no idea. My mind is going in circles this morning with work.

Natgas. Supply is still slowly declining. Supposedly with more declines to come. Demand is also still on the decline as for what is immediately being reported; industrial leading the way down. I touched on this Monday? I think… Temperatures for the US got much closer to the norm in terms of HDDs. Demand took a sharp turn down with HDDS. Since then, the US has been unseasonably cold again, masking true demand numbers again.

I am constantly tormented by this market, why do I trade this thing? Low demand being masked by cold temps and the economy is supposed to be opening back up, but we know where this is going. Is there that much unrest in the country? Maybe we should have never shut down in the first place if we’re just going to half-ass shut down, and then start back up when at 3/4 the number of daily deaths. Get ready to wear a mask everywhere. I think that’s next. “Mask required” will be posted everywhere soon. I’m guessing governments don’t want to half shut down again, even when deaths start climbing again. This says to me that demand will pick back up some, but won’t be what it was before everything began on the decline. LNG will probably drop more but hopefully not below half of max capacity.

My positions:

UNG – 10% in with an average of $13.65

I”m tempted to dump UNG, but it’s only 10%, which is very manageable. I would sell calls against it if I had enough shares. It’s all good. I really feel like today is a good day to sit and wait. I need to get to work, that should clear my mind some. Good luck today

Oldinvestor

If you have to tell people how smart you are, maybe you should rethink how smart you are.

Morning Update – May 6, 2020

Don’t forget LNG is still and will continue to be a hot topic.

Loads and Volume loaded by export facility at RonHenergy.com

Above are monthly totals of number of loads and volume loaded for exports on boat leaving US LNG export facilities. I see a small decline so far at each facility except for Cameron. Cove Point may be seeing normal fluctuations.

Daily NG consumption at each US export facility at RonHenergy.com

It appears Cheniere Energy seems to be taking the brunt of the blow to LNG exports. From what little I’ve read, it appears as a company, they are doing ok. They do have “take or pay” contracts on most of their gas, but this does not require them to export. They can, in fact, buy gas from another facility, in another country, for less… Then sell it to whomever is willing to pay more, and not have to export any gas. I’m sure they are most interested in returning to normal operations at near max capacity, keeping all their imployees in jobs and making a living at exporting gas. Just keep in mind, the company will get paid for gas that goes undelivered, but this will not help natgas demand in the US. It might be more advantageous to by shares in their company than to be trading natgas, but what fun is that!?

Just when you think there is going to cause the market to break away, another factor comes in and crushes it. Haha. It is possible this slow down in LNG could cause natgas to basically be balanced, or possibly go back into an over supplied market if industrial, res/comm, and power burn down get back on track. Either way, prices are already low, I’ll remain long biased at these prices. Obviously I’m cautious right now, selling out yesterday. I believe round 2 of the pandemic is inevitable. States are rushing to get everyone back to work, because these people are going to start protesting more, or worse, start fighting. I will just continue to be thankful for my job and my health.

On a lighter note, the world will continue to turn, and consume natgas. Lack in natgas demand is being matched or outdone by lack in oil demand. The scale will continue to shift back and forth. In the mean time, I will continue to trade UNG, and possibly UGAZ again soon (we’ll see).

My positions:

USL – 13% in with an average of $11.41 – selling out at $11.55 in order to make a DBO options trade soon

I am a bit skiddish of holding USL after yesterday’s quick run up. Part of my wants to place a stop at my average of $11.41. USL is invested in 12 oil contracts… Outside of June, July, and August contracts, Oil is near $30. This is not so inviting for me to hold USL. I am going to hold though. Because it is a small position that is priced near the bottom. This is very manageable. I’m still going to sell USL, now and I applied for options trading in my webull account. So I’ll pick up 100 shares of DBO soon and sell 1 call against it. I should still have enough funds in the account to trade UNG.

Selling USL at $11.55 for a gain of all things.

I’ll make a special post for buying DBO and selling a call as soon as I can do this. Even if I am approved, I cannot trade options until normal market hours. oh, and the EIA oil report is today I think at 10:30est? good luck

Oldinvestor

well Webull just passed over my for options. haha, isn’t that cute. I cannot stand this, not the disapproval, but not calling or messaging me to discuss this… Webull does a good job at what they have to offer, but I cannot stand the lack of communication. I may be blogging about FirstTrade soon. We’ll see

Selling of out UNG

I’m selling out completely of UNG for a bit. I may re-enter soon, but I need a breather. My $1000 example account started around $1012 because Webull gave me a couple of stocks. The account balance is currently at $1040 and my USL position is now in the green.

I just sold the rest of UNG at $14.8ish

still holding USL with 13% of funds with an average of $11.41

Today has been good