Comments (37)

Dec 31, 2018

checkout https://www.smbtraining.com/blog/futures-community
they are a group of retail traders who look for patterns in the price action

just google it...you're welcome

Dec 31, 2018

Haha come on... I'm not gonna trade with people from SMB... and f**k trendlines and triangle formations.

https://www.wallstreetoasis.com/forums/hi-i-need-d...

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Dec 31, 2018

not talking about trading with them...the slack room is just an anonymous chat platform where retail traders (most are not SMB) talk about outright markets....there have been a few times where somebody points something out that i didn't think about...and its also a good place to chat with other retail traders to bounce ideas. The slack room only costs $7 a month (its the slack platform fee).

just google it...you're welcome

Jan 2, 2019

what market are you trading?

Jan 2, 2019

pretty sure he trades nat gas

just google it...you're welcome

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Jan 2, 2019

Getting fucked wrecked today, for fuck sake. Fuck the widow maker!

Jan 2, 2019

what is the widow maker these days?

just google it...you're welcome

Jan 2, 2019

Mar-Apr

Jan 2, 2019

Pretty sure I'm down like 20 grand today. God damn it.

Most Helpful
Jan 2, 2019

Gas Trader here and was bored before going back to work 'for real' so maybe I can answer some questions. Like all trading I imagine - Gas Trading is part art part science - and there is no dead set formula, there are trades like mar/apr that many people gravitate too - but managing your risk on trading Mar/Apr depends on other macroeconomic events in the gas overall gas market.

A little NG 101 for the others in this thread - NG is a seasonal commodity mainly used for residential heating and power generation (most seasonal components). Demand is higher in the winter strip (nov-march) compared to summer months (april-october), this is what creates the seasonality of the NG forward curve.

First as foremost natural gas is a storage based market and Storage has a Iron Grip in the gas market. The NG markets needs to clear supply and demand daily and storage operators are the incremental buyer/seller that balances the market. It creates demand in the summer to fill the caverns and supply in the winter when the facilities withdraw. Spot price and the forwards move around to incentive storage players to participate in the market by injecting/withdrawing.

This Summer, Cash was strong relative to winter and did not incentivize storage players to inject. The market generally built this narrative in its mind that production growth will continue to grow at an astonishing pace and the market will "no longer need storage". This caused us to come out of the summer with historical low storage inventory. As early cold started + low inventories, fundamental traders realized that the probability of "running out of storage" by end of winter was significantly higher compared to previous years.
I remember you mentioned in a other thread on 'how to hedge' or something like that. Lets look into the Mar/Apr spread

H/J spread is essentially a "running out of storage risk premium". In a mild winter with ample production and storage this spread can trade flat or even invert negative. However if there is a risk that storage could run out you will see a larger premium in the winter months and thus this spread will blow out.

One could think that: if storage is low, then there will be a bigger demand for gas to fill storage in the summer and summer may catch a bid. However this year - it looks like the market believes that production growth will offset any extra summer demand and this is a reason why while winter rallied, summer basically stayed flat.
Now if you are forced to sell some HJ and you are looking for a hedge, buying Cal 19 (depending on how you delta it) will reduce a portion of your march short, make you longer April and give you some winter & summer length. I don't like holding summer length as evident in the rally - summer is dislocated and if no winter shows up you might got uber fucked if not only is there enough production but you don't need to fill as much anymore. (essentially you are trading outrights - not a hedge) So really if your just a market maker trying to Hegde in Dec you should have bought some Jan, Febs in this case as a hedge.

Now reading this thread it sounds like you were long HJ

Now over the holidays H/J got crushed. Why? Well at the End of Dec the market could see what early Jan weather looks like - and guess what - all the mets are wrong (surprise !?) and Jan is looking warmer than normal. Well all of a sudden even if Feb is Cold, your risk of running out of storage and grandma in Wisconsin freezing is no longer there and the market has raced to the door to erode the winter risk premium.

If I was long H/J - and wanted to be greedy and keep holding - I would have probably loaded up on some puts as insurance

If you are trading NG and are not calculating seasonal storage balances - you are the dumb money.

Obviously this is written in hindsight, dont @ me

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Jan 2, 2019

this was great...exactly what a trader needs to be thinking about to position in a spread market.

The equiv in the interest rates market would be "pension funds needed to rebalance stocks vs bonds ratio at the end of the year because of the equity markt selloff...so they bought stocks and sold 30yr bonds..overwhelming the 30yr market liquidity...and steepening out the 30yr curve. This is a temporary effect...but its hard to know exactly how long it will take for the market to absorb all that 30yr selling and flatten back out with the rest of the rates curve.

just google it...you're welcome

Jan 3, 2019

You are not thinking 10-30 correctly. At least not for a guy with an 1800 target on the snp.

10-30 does not need to follow the rest of the curve and invert. The inversion in tbe front is a reason to buy 10-30. It's cheap for a rate cut cycle. And the inverting front end and penny stock snp both imply cuts are coming.

Granted i agree with you more than this theory. If the fed is able to stay hawkish or neutral here then 10/30 is a sale. If we get an equity bloodbath then it can find a huge bid even at these levels. It use to be the great risks - off long.

Array
Jan 2, 2019

Can you elaborate on seasonal storage balances and how I would go about modeling that?

Well I forced into HJ9... had a good amount of contracts on. The senior traders make market in the cal strips. Fortunately I don't... I can trade but I guess I'm trying to understand my positions around it. So can you explain this....

Let's say I'm long 70 HJ and I can hedge selling 10 Summers or using other strips. Why does my outright exposures cause my spreads to be short? Also lets say i use the summer strips and I have to unwind down the remaining spreads like MN... NQ and etc.. I know these strips are an average price so how do I know these spreads can get out for a scratch or a loss or profit without knowing where I got the fills?

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Jan 4, 2019

How are you trading this stuff without that most basic of fundamental analysis? Not being a knob, genuinely curious.

You build a very simply balance up by creating seasonal normal supply (i.e. production, storage, LNG import/export) and demand (i.e. residential, CCGT etc.) forecasts.

Jan 2, 2019

In other words, the strips will give me a residual and expose to me to long outright and short spreads but what i don't understand why does the strip flip my spread positions to short.

Jan 2, 2019
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