Use The Force Be With You - What are your thoughts on $4.50 natty gas by Dec? Jan?

Here's my thoughts. Buy to open Dec $4.50 calls for $880 and sell to open Dec $5 calls for $360. Net debit of $520 per trade. Also max loss. I'll explain max gain later. It is capped by virtue of selling the $5 call to help finance the purchase of the $4.50 call.

Same in Jan. Except the net debit per trade and max loss per is $710.

That's tonight's prices. I'm going to wait until at least next week as I expect NG to fall further.

Everything I read is that $4.50 gas is really the price for the foreseeable future as a benchmark. Due to the 5 year levels my logic is to use $4.50 as the in the money price point to trigger the profit.

I really thought hard about a call spread of $4.00/$4.50, but I think more aggressive is better given the current supply fundamentals.

Thoughts?

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Posted by L S Usetheforce

Member since Jun 2004

22918 posts

Posted on 7/29/14 at 6:35 am to Iowa Golfer

Well given the fact that we are getting actual cold fronts early this has an opportunity to do two things; it could extend injection season and drop price further by getting storage to roughly 3600 almost to 5 year low avg benchmark..

I think what happens here is by October warming season will begin earlier...... This will cause ng traders to look at the bigger picture.....

Bigger picture is that another rough winter and we could potentially exhaust all storage..... Which is really want producers want......

I see no way if weather patterns Continue to trend cool how natural gas doesn't hit 5 dollars by Jan 1st and 7 by Feb.

This post was edited on 7/29/14 at 6:38 am

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