ACE Natural Gas - Jun 29, 2020

ACE Natural Gas - Jun 29, 2020

Below is an illustration trading futures options on Natural Gas.  Our post shows bullish and bearish positions using a combination of call and put options.

Trade Options on Futures

Natural Gas * Directional & Neutral Positions

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Commentary

  • Natural Gas down 7.5% on close 1.537 over 8% on the lows 1.517 Aug NG
  • 25 year lows with rig counts falling, production suffering, demand is light
  • EIA 120bil cu/ft build into inventory, larger than expected 105 - 110 expected
  • 75 bil cu/ft build expected (5 yr average), more NG going into supplies
  • Demand issue, comfortable 70s, no cold. Industrial demand low

Term Structure

ng vol

Volatility

Options fall into the category of being slightly overvalued in non-volatile markets in the weekly options report. 
Ask about the Weekly Option's Report for more information.
 
ng optv

ng skew

Notes:

Contract Size - 10,000 million British thermal units (mmBtu).

Tick Size:  U.S. Dollars and Cents per mmBTU

Trading Hours: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60-minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

* Tip: Understanding what the numbers mean when looking at Natural Gas prices. The quotation you see is U.S. dollars and cents. Each contract you are buying or selling is 10,000MM btu (British Thermal Units).  A 1 tick move is $10 USD calculated as .001 x 10,000 mmBTU  Think of quotes as dollars per hundred pounds (or cents per pound).

?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here to read a helpful tip about Natural Gas futures and options

Natural Gas Charts

Below are the August Natural Gas charts

ng weekly

ng daily 2

* Tip: To view a larger chart image, simply right click on the image with your mouse. Next, select view image (or open image in new tab).

?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here on enlarging images

Strategies

Below is an iron condor relatively delta neutral with estimated margin per 1 LOT. The illustration beneath is a calendarized version using put options with a slight directional bias bullish. Each has positive time decay where the iron condor will benefit slightly from a decline in implied volatility while the latter is opposite. Last is a butterfly using put options. Each would be impacted by changes in the April NG futures.

The % yield shown in the diagrams below represent an estimated return on margin from projected dates shown below. The structure has positive time decay which is an advantage over holding outright options.

Reverse Calendar

ng B

Iron Condor

ng C

Vertical Swap

ng vswap

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