I actually would close out with an EFS for my N futs, and buy Hub Physical at phys basis. Then I sell a rateable amount of hub to the cash market every morning and offset the like volume each day of my Q futs.
All Excellent thread - will keep reading and offer anything I might be able to Question regarding cash. Used to think that as expiry approached cash would become the dog that wagged the soon-to-expire-prompt's tail (logic and everything you ever read about futures theory suggested - even demanded it). Over the years this seems to have deteriorated where now prompt can gap 20c and the basis to cash holds at whatever it was the day/several days before. And it now appears that cash is the tail being wagged by prompt futures, which can now be played by dentists via UNG. Has anyone else noticed this? Much appreciation in advance.
Just re-iterating: You trade your Q futs for a July(?) swap (swapping June settle for July settle)? then take your July settle cash and buy HH at phys basis and sell into spot to draw down your -Q exposure by making physical delivery? I think I get it, but I'm not completely sure what you're exchanging your +N for in the EFS. If it's +N for June settle (i.e. you just cash out at June settle) then you'd be 15- 20 cents short of being able to buy Q gas.
June doesn't come into play on this spread. Currently, I am long July futures and short August futures. There are a couple of different ways to take this into the physical market. If I just held the spread and let it go to expiry, I would have to take delivery of Hub gas for a rateable daily quantity of gas in July. So let's say I had 31 spreads on, I would Be long 310,000 MMBtu's total/31 days in July which equals 10,000 MMBtu a day (1 NYMEX contract equiv per day) I would still have my 31 short August Nymex contracts on. So each day in July, I would have to sell 10,000 MMBtu of physical Hub into the daily spot market, and buy back 1 August Nymex, (hopefully at a tighter spread than where I originally acquired the futures spread). I would do this each day until all the phys was sold off and all my Aug futs have been covered.
Thanks, day4night. ..and re-reading my post this morning I see it may not be clear I was asking "How tradeable are NG spreads at night?".
I meant July/August, sorry. Are there cash/margin implications of going from spread to outright short August? Are you enheartened or dis-enheartened by the fact that spot has been trading further than usual below prompt month NYMEX almost the whole month? Oh, and can anyone do this (take the position to physical)? I guess you just need to know some people who regularly buy spot HH. I thought you had to send the clearinghouse a notice of intent to accept, and the details of how you intend to dispose of the gas (usually this would be to a specific, gas-using/moving/storing customer)? I appreciate you taking the time to share. This is the kind of esoteric shit that I can't get the folks at work to talk much about (I usually assume that means they don't know either...)
Coincidentally I stumbeld across something sort of like this in Sturm's "Trading Natural Gas" under "speculative applications for swing swaps" (page 88). It made me think about you liquidating your -Q: it's not all that easy to do every day (think weekends). I guess you need so buy back 3 contracts on Friday (or Monday, whatever...).