couple thoughts...first not criticizing the poster going long ng...these are just thoughts in general re ng a poster talked re the larger than expected inv # and price still going down - a good rule of thumb is that when price does the opposite of what you think will happen then price is about to move huge. re using a leveraged etf to play this. first off buying and holding ng in any instrument is difficult due to steep contango (prob more than any other commodity). there are a couple ways to trade it all w/ their own risks: ung - this is the worst etf created in the history of man. anyone buying and holding this for longer than a week should not be allowed to vote. buy front month futures and roll (this is what ung does) - this is a problem for the same reason ung screws investors - the massive negative roll yield - price has to go up more than the roll yield for you to even make 1 penny buy longer dated futures and not have to roll - the prob by def is these cars assume a higher price in future - sometimes 30, 40 or even 50% higher than spot buy nat gas producers like chk - you now have company risk like chk when they almost went bankrupt b/c they overleveraged to buy land. re production "has to stop" - b/c of the nature of the leases these cos have signed - they are forced to continue drilling otherwise they lose the leases so normal laws of supply and demand don't apply. re this country moving away from cl and towards ng - you're preaching to the choir on this one but trading is not about what should happen and everything to do w/ what is happening.
Stupid question, but how come my energy bill doesn't go down (house heated by natural gas) when the price of natural gas goes down?
Good point. Are futures any good for directional investment ? He should look at spreads, Also look at eqity such as ETP, they make money from transportation among other reasons......
Thank you Frank. I appreciate well meaning advice such as this. Yes, I have noticed that when price seems to ignore fundamentals I need to pay attention. I hung in there with this trade in the hopes that it was exhaustion selling. I may be proven wrong momentarily. I completely agree that contango and leveraged etfs reduce your chances of coming out with a profit, especially in the long term. I was in only for a bounce this time. I tried reading up on this in wiki a while ago. There seems to be a "delay rental fee" that can be paid to lessors. I wonder at what point it is more economical to pay out this fee than to commence drilling on leased lands. Not that this would make me bullish. IMO this low price will help move things along. I try to keep my conspiratorial thinking to a minimum but I can't help but wonder if this "crash" in nat gas prices was designed. If I were a big producer, I would want price to crash to stimulate demand the year before my hedges run out.
Shale gas combined with increasing LNG liquefaction capacity is going to depress NG prices for years to come. Qatar Gas and Gazprom are already flooding US pipes w/ decompressed LNG and this is unlikely to stop as both need to find any markets to sell their gas into. If you're in NG for the bounce then be in it for the bounce w/ tight risk, but don't be long NG long term - you will get crushed.
http://finance.yahoo.com/news/Largest-option-buying-optmonster-3139917112.html?x=0 the only question is-what for?
Thanks, I didn't know about Gazprom/Royal Dutch Shell, Qatargas etc. And btw, I've now been stopped out. I still think next week's colder weather will cause at least a dead cat bounce, but I'm done trying to catch it.
Like I said, catching bottoms is rare and will cost you more money than it will make you... you need to see some sign of intervention
I'm reluctant to say ANYTHING bullish at this point, but I read speculation somewhere that while inventory levels are normally reduced in the winter, this year it may be a hot summer that will finally drawdown inventory.
CME Group Inc. (CME) cut the amount of collateral traders must put up to trade its main natural-gas contract Friday, as prices continue to slide to multi-year lows. Speculators now must put up an initial margin of $2,835 to trade a contract for natural-gas futures on the New York Mercantile Exchange, down from $3,375. To keep the contract open, traders must put up $2,100, down from $2,500. For hedgers and exchange members, the initial margin was reduced to $2,100 from $2,500, as was the maintenance margin. Exchange operators often adjust margin requirements in response to volatility levels. http://online.wsj.com/article/BT-CO-20120113-712142.html