Its the same concept as DBC, only now there are now 29 Funds so you can just buy Coffee, as an example, instead of a predesigned basket. Go to the London Stock Exchange site, there is plenty of info there. Actually, I'm kind of surprised more more people aren't talking about them?
Mid to late 2005 would have been a horrible time to go short ng. Something like at 70K loss on a full size contract.
Hello everybody, As an avid energy trader, I have followed the introduction of "NGAS", listed on the LSE, which is a natural gas tracker. Some comments here are pertinent, but incomplete. NGAS is a fantastic instrument for playing nat gas if important elements are understood and taken into consideration when trading NGAS. First of all, the natural gas market is particularly sensitive to fundamentals such as stocks in reserve, temperature, wellhead prices, its comparative cost to oil ...etc. If you are not willing to take the time to learn how these funadamentals impact prices, and follow up religiously on publications and news, don't even bother attempting to trade nat gas ... you will get severly burned sooner or latter. In regards to the VERY high rate of contango AND backwardation between certain expiries in nat gas markets (especialy near the end of winter and the end of fall months), you can use this to your advantage if you understand contango/backwardation. Last week, when NGAS was introduced on LSE, I noticed that: 1) Nat gas front month was trading at about 5.50... BELOW average wellhead prices (6.40 at the time) 2) COT data was particularly extreme (possibly due to Amaranth) 3) underground stockpiling was near historically peak levels 4) we are near the end of the stockpiling season (april to october) ... these conditions are idealfor building long nat gas positions. So, I pilled into long nat gas (via QG & NGAS) when QG was at 5.50. ... so far, this position is showing a profit of about 18%, but I am still looking for nat gas to hit at least 10.00 during the next 2 or 3 months. The contango between the Nov & Dec contracts is 21.8% (as of Oct. 6th, Nov. NG is 6.427, and Dec NG is 7.827). Assuming that this contango remains more or less stable, this contango will impact negatively on the NAV of NGAS when the managers of NGAS roll from November into December. Knowing that the rollover period of NGAS takes 5 days, from the 9th of October to the 13th, I will reverse my position during this period, thus taking profits from my long position and going short NGAS during the roll period. Even if natural gas prices tend to increase during this period, I will gain about 20% just in the roll (assuming that the contango remains more or less the same). Therefore, being short NGAS during the roll period, when the market is in contango, will pay fairly big if prices remain stable, and even if prices increase while I am short NGAS, the contango during the roll period will most likely compensate for all of the movement against my short position. At the end of the roll period, I intend to get back into a long position on NGAS. This procedure may be repeated a few times during the contango market (generaly during fall & winter months). Once the end of the winter comes around and the near months are in backwardation, the same principles apply ... everything is just reversed. To end, I think it is safe to say that if you are willing to do some homework and keep up to date on things, there are enournous opportuities in NGAS. ... For those of you who think you can just trade NGAS off a chart, think again ! Though all this may seem somewhat confusing to many at first, with a bit of research it is relatively simple. Good luck to all.
gosh ... for a first time poster your knowledge and timing is quite impressive ... so tell me have you ever had a losing week trading the ever volatile nat gas? thats some prediction you made ... unless there is a hurricane style event in the next few months I think the odds of nat gas reaching 10 are remote maybe 7.50 - 8.50 is possible in the short term or do you think the unwinding or amaranth is going to cause such a spike ? thanks for the LSE info ... even if I am unable to trade it I might just have to track it more closely when I scalp or attempt to arb my nat gas trades ps ... did you know that USO tracks crude oil ?
Hello Seth Arb, I look around here from time to time, but haven't posted here until today. The bulk of my trading activity is in FX, though I do trade energies actively. Yes, of course I have been buned in the past on nat gas, just as I have had losing trades on other asset clesses as well (obviously). In my oppinion, the key to trading successfuly is risk management... if the risk is managed well, the profits are just a natural consequence (as long as you have at least some reasonable entries/exits). Yes, I have traded USO too. If fact, one play I like with USO is short USD and long PXL ... PXL recieves dividends, while USO is an erroding asset (due to the rollover). By maintaining long PXL & short USO, the probability of a gain over the long haul is most certain ... I have been doin this for quite some time now. You don't have access to LSE ? ... might I suggest oppening an account at Interactive Brokers ? ... not to sound like a salesman or anything, but I'm a happy camper with IB for the past 6 years.
SethArb, if you are interested in chatting, I am often in the Money Tec chat. Its essentialy FX traders in there, but quite a few of us also trade other asset classes such as metals & energies. Hope to speak soon ParisJOM
Been a good week on the short side of nat gas. Reversing position here and going long nov & dec contracts. Looking for at least a 25% move North bofore Jan. May not be all that relavant, but it seems like everybody and their dog is expecting oil to plummit down to 50. Well, in time they may be right, but one this is certain... prices do not move in straight lines. We have seen about a 25% free fall in oil and even a further fall in nat gas. Even a small correction here should pay handsomely in long nat gas.
Exited my short position a day before the big drop (yesterday) and took small (very small) profits -- but for other reasons, mainly seeing spot price jump so high ... 5.65 versus my sales avg of 6.15 (it hurts!) Anyway, when I opened the position, the difference was in the 1.50-2.00 range. That was my signal out. Anyway, here we differ in our approach. I say nothing holding gas up now, and oil correlates more with gold than nat. gas at this moment. Price target is 5.00 for November. December is another story. One prolonged cold storm and will could be up $1.50 just like before. Hoping for a spike up next week so I have something better to short on.. I only have one open position (small) right now and would like something better to work with.