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March 20, 2013

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Natural Gas trades using options strategies

The weather in the US is unfolding in a tough winter. And according to the Farmers’ Almanac’s famous weather outlook, it’s going to be a cold one, with plenty of snow. I know, this is nothing new, right? In fact the natural gas price started to climb better than a month a go. People would think that this train left the station and trade opportunities failed already. Maybe if one trades directional, but there are plenty of other ways to take a cut of this. True, one needs to dig deeper and things get's more complicated... First opportunity is in the futures market. Look at the expiration months and you'll see that natural gas price are in backwardation. That means front month prices are more expensive than back month, implying that current demand is more stronger than supply. So, this is a way of approaching this. Natural Gas prices in futures market Second opportunity and my favorite is in the natural gas ETF, UNG. Implied volatility is at 84% and IV rank( the level

Earnings season is here and this week is rich in companies which reports earning, adding at that the recent moves in market is better to be cautios. All i trade, beside closing the trades i already had and expire in April or my view changed, is intra-day trades. We have though some potential in Japanese Yen which can be materialized in EWJ and FXY (almost 100% IV) and of course the extraordinary moves in GLD and SLV, USO has some hidden buyers, so at least for that needs to be kept close by. Another idea i like is to watch the move of the next day after earnings and if i already didn't had a position maybe to see how the stock acts if we open with a gap...

Stock market news

I find it amusing that every time the price of the market goes up or down, the information and media services companies, which cover financial markets, always find the right answer for this moves. I guess that's the news business market because people feel safe if they can make an association and 'know the reason', make them more prepared for the next time...:) Frankly, I think is bullshit most of the time. For example, the oil market can go up because there is tension in Middle East or it can go down because there are too many rigs open in parallel with an excess of supply, or maybe the one of the many mammoth companies from the field anticipate a change in future prices and want to hedge their reserves or maybe lock the price for the next cycle using /CL futures contract...anyway the options are endless. The capital market is way to complex today to be able to find that reason which determined the move. What's more important is to adapt and be curious. Curious about

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