Long term investment of Natural Gas

Discussion in 'Commodity Futures' started by heispark, Nov 8, 2019.

  1. Handle123

    Handle123

    Nat Gas bottom was August 2019, very nice H&S weekly middle of October, Nov 5 shows daily triple at 2.90 area/, waiting for deep retracement to add to longs/hedged.

    Considering buying EFT's long on funds seems not using account to one's advantage whereas future's, at least to me. Now granted most markets in futures can gap or go limit, so best to fully understand markets you want to trade to last 20 years on historicals, and ETF's gap as well.

    One way to trade are Spreads as below long NG Jan20/ short NG Jan21, margins smaller and still good kick for profits.


    upload_2019-11-9_0-22-12.png
     
    #11     Nov 9, 2019
  2. qwerty11

    qwerty11

    That's only true for broad (stock) indexes. Not for commodity ETFs. And NG is the most volatile of them all.
     
    Last edited: Nov 9, 2019
    #12     Nov 9, 2019
    Wheezooo likes this.
  3. qwerty11

    qwerty11

    1) do as told in the second post (long LT future)

    2) short an inverse natgas ETF
     
    #13     Nov 9, 2019
  4. Wheezooo

    Wheezooo

    Ya mean like in 2002-2003, when Enron went down, and all energy stocks went near 0. ;)
     
    #14     Nov 10, 2019
  5. Wheezooo

    Wheezooo

    It's pure, it's simple, it's clean, it answers the question at 100% correlation.

    No need to go 10 years out, once you pass the contango/backwardation noise, say about 3-5 years out, there is no difference between 5 and 10 years. It's safe to treat one as the other, you'll only have interest rate risk on those spreads.

    It should be 'much' deeper than you see. I'd calculate the fair value, bid/offer giving up a slight edge, let a term market maker lean on me, and fill me when he finds something better to spread against it. Those spreads shouldn't be more than 2 cents wide OTC.
     
    #15     Nov 10, 2019
  6. Sig

    Sig

    I was looking to hedge actual exposure to gas rates for a generation project I was working on that would actually consume gas every year for 10 years. So I'm some cases, yes it matters what price you can hedge for 2029 if you have actual 2029 exposure! But certainly, if you are just trading then the difference between years probably falls off exponentially at some point.
     
    #16     Nov 10, 2019
  7. Wheezooo

    Wheezooo

    As I said:
    1- surprised you can't find a 10 yr monthly strip.
    2- hedging 2029 with 2029 will of course be the best hedge. You implied that was between, unavailable and difficult to procure.
    3- it makes no difference 'trading' or against generation. A hedge is a hedge. And say 25 is the best you can find. The spread between that and 29 ain't moving a penny. It works as a 'near' perfect hedge for your purposes, and gives you insane time to roll it back slowly.
     
    #17     Nov 10, 2019
  8. Wheezooo

    Wheezooo

    Just curious, by generation, do you mean gas gen or electric gen with gas.?
     
    #18     Nov 10, 2019
  9. Sig

    Sig

    Combined heat and power using gas to generate electricity and hot water.
     
    #19     Nov 10, 2019
  10. Wheezooo

    Wheezooo

    If my simplification of what you said is correct. I gotta ask:

    Are you planing on simultaneously contracting/selling forward your electrical generation when buying in your gas exposure?
     
    #20     Nov 11, 2019