Its not the primary basis. The primary one is that inventories are at record highs, consumption at hubs is decreasing (look on Bentek energy's hub flow display) and weather isn't that bullish (compared to fri at least) for n. gas. Spot prices, and a weak Dec are icing on the cake.
here's some interesting COT info.. most recent weeks first on the graphs. notice the two reductions on spread counts. I assume they have quite a bit more open. 6 billion dollars loss divided by lets say 20k loss per spread is 200k potential contracts. This thing may unwind for a whole year, one month at a time.
Yes, fundamentals do matter alot in nat gas. Was I not clear on that when I mentioned colder weather and peaking inventories ? I have also been following the COT data and it is giving me all the more reason to be long nat gas. "Haven't seen a spike up" ? ..I know nat gas is volatile, but even in this market, yesterday's 15% jump is a "spike up" in my books. You phrase "...not too many stops are positioned to buy right now. The spikes down say everyone is positioned to sell this market" is unclear..... for every transaction there is a buyer and a seller. Anyway, I've done my homework, placed my bets and the market will let me know if I made a good deal or not in due time. I'm in no hurry for this to pan out, have risk established at conservative levels and have already taken a good part recent moves since this summer.
By spikes, I refer to instanteous movements - the type of thing you often see during report releases. Won't show up on a 1 month chart. Watch a 3 minute bar for what I'm referring to. Yesterday's buying was gradual and systematic. I think another build is expected ... so we're not at the end of the season.
Ok, we are obviously trading this thing farr differently. I don't bother zooming into the micro time frames ... too much noise for my longer term aproach.
my trade duration can be anywhere from 15 minute scalp to 1 month position. So I look at this thing from all angles. By the way, the selling today has more conviction than yesterday's buying. Higher volume and the spikes I mentioned are there. On the other hand, If it goes back up to 6.90 on another round of amaranth buying, I'm selling again. (probably 6.80 to 6.85...)
Just some questions on the structures. By some off chance, do you know how Amaranth's positions were structured ? futures, options, exchange traded or OTC contracts, a complex combination of all of the afforementioned ? Concerning the unwinding of the spreads, would it not be plausible to assume that the unwinding of spreads would have a relatively neutral effect on the market as unwinding a spread involves both a sell and a buy order ? Also, if options were involved in these positions, it is near impossible to even begin to imagine if the unwinding would have any effect at all ... many options positions may be abandoned and therefore have no effect at all. Just some food for thought
I think its false to think that the unwinding of spreads would have a neutral effect, because the buying and selling occurs in different contract months, so for example the near month would experience excessive buying and the far out month excessive selling or vice versa depending on the whether the spread position was a bullish or bearish one. In regards to the options positions we don't know if they bought options or sold options (if sold the positions can't be abandoned). If they sold options the resulting covering would cause fluctuations in the underlying due to hedging by the market makers. -Neo
Without knowing the structure of the positions we are left with only guesses as to which months are going to be impacted, and how. An option can always be abandoned... whoever the buyer is.
shoulder months were most heavily publicized as being the heaviest bets. Just look for months that have the largest variance between near months and realize there may be inbalances still. ie Nov/Dec, Mar/Apr, etc.