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looking for a liquid, low fee way to trade natural gas futures

http://list.summitbusinessmedia.com/t/4030475/76318622/460901/14...

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OP was on target. NatGas is sound investment.

Anyone curious about Oil plunge in the same timeframe? USO trading 29, down... (more)

SinglePapa (Jun. 26, 2012 @ 11:04a) |

Talk about oversold, and about value pickers. Oil rallies fully $7/bbl from $77 low = 10% in one day!

SinglePapa (Jun. 29, 2012 @ 1:07p) |

Look at that Oil continue flying: over $87 in just 3 trading days! USO from $29 to $34

SinglePapa (Jul. 03, 2012 @ 3:54p) |

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Too bad mf global is gone

nycll said:   Too bad mf global is gone


yeah but i'll be getting some money back http://list.summitbusinessmedia.com/t/4030475/76318622/455948/15...

Interactive Brokers, costs about $2 per contract (10000x).

UNG, BOIL, KOLD


vickh said:   looking for a liquid, low fee way to trade natural gas futures

http://list.summitbusinessmedia.com/t/4030475/76318622/460901/14...

You know you still have to beat the present expectations of the futures market to make any money, right? If NG prices rise as predicted, you make nothing holding them. You need the futures market to be wrong, and guess which way now. Good luck.

Or buy a natural gas storage facility, then buy natural gas at the cash price of 2.08 to fill it up and sell short the contracts for Jan 2013 delivery at 3.21. Guaranteed 60% return since both prices are locked in today. Must be nice if you own the facilities to do something like that.

awstick said:   Or buy a natural gas storage facility, then buy natural gas at the cash price of 2.08 to fill it up and sell short the contracts for Jan 2013 delivery at 3.21. Guaranteed 60% return since both prices are locked in today. Must be nice if you own the facilities to do something like that.

You do realize that your 60% return ignores all the costs involved in your scenario? Chances are the costs would suck up most of the return, otherwise the contracts would be priced differently.

Of course there are costs and it's not the easiest to implement, which explains the contango pricing. But I doubt the variable costs of storing natural gas for nine months is $1.10/mmbtu. It probably just reflects the fact that every storage facility will be filled anyway during injection season and the producers have to unload the gas they are producing right now. It would be impossible to get something online to take advantage of the pricing on short notice, but it does seems to be a nice business to be in if you already had the capacity.

this kind of question is usually asked at a market top

vickh, are you calling a bottom?

germanpope said:   this kind of question is usually asked at a market top

vickh, are you calling a bottom?


exactly... Of course it's not risk free. it might be catching a falling knife.
But sounds like the ETFs above are the way to go...

low fee way!? IS that possible

sure everyone should be interested in a LONG around $2, just as everyone should have been interested in a SHORT around $14 of 5-7 years ago. But as a curious bit of info: NatGas is one of the commodities that has the ability of below zero pricing. There was a precedent in the cash market for Alberta delivery in 2003-2004 as I recall. You just can't plug her in!!

can't you just burn it off? i guess that has costs too...

Not going to trade for speculation, but what would be the best way to hedge your own consumption of natural gas at these super low prices?

buy a dairy farm

jkimcpa said:   UNG, BOIL, KOLD


Thanks for the info. According to the price chart below, I see that UNG went all the way from $500 (in 2008) to $15 now.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=...

But natural gas price went only from $14 (2008) to $2 now.

I know both of them drop a lot, but still, there is a huge different from $500 to $15 vs $14 to $2.

RidicuRuss said:   Not going to trade for speculation, but what would be the best way to hedge your own consumption of natural gas at these super low prices?
I think buying large NG producers. Cheasapke is the easiest choice but it has some corporate governance issue with the CEO.

echip said:   jkimcpa said:   UNG, BOIL, KOLD


Thanks for the info. According to the price chart below, I see that UNG went all the way from $500 (in 2008) to $15 now.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=...

But natural gas price went only from $14 (2008) to $2 now.

I know both of them drop a lot, but still, there is a huge different from $500 to $15 vs $14 to $2.
It's due to contango/backwardation because futures contracts roll month/month. They reflect the daily movements, i.e. it has a compounding effect intra-month, then you get screwed when the fund has to roll to next month's contract which will have a higher price (in an upward market) which is why you see contango. The opposite is backwardation.

echip said:   jkimcpa said:   UNG, BOIL, KOLD


Thanks for the info. According to the price chart below, I see that UNG went all the way from $500 (in 2008) to $15 now.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=...

But natural gas price went only from $14 (2008) to $2 now.

I know both of them drop a lot, but still, there is a huge different from $500 to $15 vs $14 to $2.


The ETF had two reverse splits; 1-2 and 1-4. So the actual difference in price factor was from ~$400 to ~$120 (8x15). The shares never actually traded for $400; it went from $50 down to $5, the reverse 1-2 split bumped it to $10, back down to $5, reverse 1-4 split up to $20.

germanpope said:   this kind of question is usually asked at a market top

Agreed. These kinds of threads historically have a greater than 75% likelihood of indicating at least a short term peak.

awstick said:   Or buy a natural gas storage facility, then buy natural gas at the cash price of 2.08 to fill it up and sell short the contracts for Jan 2013 delivery at 3.21. Guaranteed 60% return since both prices are locked in today. Must be nice if you own the facilities to do something like that.

Google John Arnold.

why not just buy CHK ? close to 52 week low and p/e of 8 price/book 0.83

xchange55 said:   echip said:   jkimcpa said:   UNG, BOIL, KOLD


Thanks for the info. According to the price chart below, I see that UNG went all the way from $500 (in 2008) to $15 now.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=...

But natural gas price went only from $14 (2008) to $2 now.

I know both of them drop a lot, but still, there is a huge different from $500 to $15 vs $14 to $2.


The ETF had two reverse splits; 1-2 and 1-4. So the actual difference in price factor was from ~$400 to ~$120 (8x15). The shares never actually traded for $400; it went from $50 down to $5, the reverse 1-2 split bumped it to $10, back down to $5, reverse 1-4 split up to $20.


OK thanks. So it went from $50 to $5. Reverse splitted 1-2 bumped to $10, then back down again to $5. That meant UNG went from $50 to $2.50.
But Natural gas only down from $14 to $2.

jkimcpa said:   


It's due to contango/backwardation because futures contracts roll month/month. They reflect the daily movements, i.e. it has a compounding effect intra-month, then you get screwed when the fund has to roll to next month's contract which will have a higher price (in an upward market) which is why you see contango. The opposite is backwardation.



I see. Thanks.

RidicuRuss said:   Not going to trade for speculation, but what would be the best way to hedge your own consumption of natural gas at these super low prices?

Long dated natural gas futures?

It's kind of silly though. How much natty do you actually use? Even the mini contracts are a lot.

if your chart doesn't account for 1:8 split, doesn't it depict current price= about 1/4 of 2008 top?
While futures are about 1/6?

echip said:   xchange55 said:   echip said:   jkimcpa said:   UNG, BOIL, KOLD


Thanks for the info. According to the price chart below, I see that UNG went all the way from $500 (in 2008) to $15 now.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=...

But natural gas price went only from $14 (2008) to $2 now.

I know both of them drop a lot, but still, there is a huge different from $500 to $15 vs $14 to $2.


The ETF had two reverse splits; 1-2 and 1-4. So the actual difference in price factor was from ~$400 to ~$120 (8x15). The shares never actually traded for $400; it went from $50 down to $5, the reverse 1-2 split bumped it to $10, back down to $5, reverse 1-4 split up to $20.


OK thanks. So it went from $50 to $5. Reverse splitted 1-2 bumped to $10, then back down again to $5. That meant UNG went from $50 to $2.50.
But Natural gas only down from $14 to $2.

The NG latent supply overhang today is gargantuan. I'm talking about HBP pads, less than 15% developed, but with stone in place and just sitting, waiting for any inkling of a NG price increase.

Setting aside the latent stuff (dry gas), you also are facing large scale (more or less) mandatory development of wet gas wells. These are paying propositions because of the NGLs. But after separation there remains more available (dried) gas than you can imagine. And this gas will be produced and brought to market because production of the NGLs, even today, is a paying, profitable situation.

So bottom line, we are awash with existing NG, and the overhang is mind boggling. You don't need luck or have to be a genius to find shale gas. Trust me.

I know this sounds extreme. But it would not shock me to learn of (at least some) flaring off of NG, in the USA, within the next eighteen months.

so how far are we from utilizing this kind of BTU windfall to replace some of Liquid hydrocarbon usage?

Even with this crash in NG prices, my heating bill did not go down much- in spite of the mild winter.

The utilities are screwing us - I cannot imagine having a business buying gas at 2 bucks and selling us at 8 bucks, while all the way claiming they do not profit off the prices and charging extra for the distribution.

SinglePapa said:   so how far are we from utilizing this kind of BTU windfall to replace some of Liquid hydrocarbon usage?

You are asking your question too early. Ask after early November of this year.

jeeves said:   Even with this crash in NG prices, my heating bill did not go down much- in spite of the mild winter.

The utilities are screwing us - I cannot imagine having a business buying gas at 2 bucks and selling us at 8 bucks, while all the way claiming they do not profit off the prices and charging extra for the distribution.


There was probably some scamming going on. But remember, the NG you burn is mostly not priced based on spot. You are seeing the outcome of contract pricing. Presumably, had spot prices gone north instead of south, you would have had some protection. I'm not vouching for this way of doing things. Just sayin' it's how things are.

manuvns said:   why not just buy CHK ? close to 52 week low and p/e of 8 price/book 0.83CEO shenanigans and off balance sheet liabilities...very Enron-esque. That's why investors are running towards the exits.

I second guardian44. I've observed all utility hedge accounts year-after-year and decade-after-decade to be duly hedging via strips of futures, in the Bull or Bear. And remember: you, citizen, will never win. Like guardian44 said: you'll never see your bill "break" following spot "break". But on the upside, utility mono/oligo-poly will find plenty of excuse to get another hike approval

guardian44 said:   jeeves said:   Even with this crash in NG prices, my heating bill did not go down much- in spite of the mild winter.

The utilities are screwing us - I cannot imagine having a business buying gas at 2 bucks and selling us at 8 bucks, while all the way claiming they do not profit off the prices and charging extra for the distribution.


There was probably some scamming going on. But remember, the NG you burn is mostly not priced based on spot. You are seeing the outcome of contract pricing. Presumably, had spot prices gone north instead of south, you would have had some protection. I'm not vouching for this way of doing things. Just sayin' it's how things are.

SinglePapa said:   so how far are we from utilizing this kind of BTU windfall to replace some of Liquid hydrocarbon usage?

Given the stupid fools in the House probably several light years in distance remember you have opposition from the refiners. CNG either needs the same tax breaks as liquid fuels or needs the liquid fuel tax breaks cancelled. Boone Pickens has been pushing this for 5 years now and is no closer than he was in 2008. A gallon of gasoline is about 125,000 btu's. So an MMbtu. NG is roughly equal to 8 gallons of gasoline or 7.246 gallons of Diesel.

AS for CHK, that reeks of Phillips Petroleum and Ada Petroleum. Back in the late 1940's and early 50's KS Adams was CEO and chairman of Phillips. His son Bud Adams (Oilers/Titans owner) owned ADA Petroleum. Phillips would go out and take all of the risk on wildcat wells. If Phillips "hit" ADA would buy up leases on surrounding property and do the infill or development drilling without the risk of the wild cat wells. CHK may or may not be the same deal but it does stink. The CEO is taking business opportunities that rightfully belong in my opinion to the CHK share holders.

I see a bunch of neophytes here waiting to be fleeced. For example NG is priced at Henry La. Piping it to Boston you lose 20% to compressor fuel and another 2 or 3% to lost and unaccounted for. Then add transmission costs on top of that. Operating costs and capital costs of storage depends on how many trips (injection/withdrawal cycles) are made each year. If only one you get to pick up 100% of the operating and capital costs for that MCF of storage space. Since that mcf has been processed for NGL's its heat value is usually 965btu/cu ft. So you lose another 3.5% that way. I worked for Tennessee Gas Pipeline, Amoco Gas Co and Valero transmission Co from 1978 to 1991 so I pretty well know where the bodies are buried. This is not a game you want to play if you don't know all the ways to cheat.

nsdp said:   SinglePapa said:   so how far are we from utilizing this kind of BTU windfall to replace some of Liquid hydrocarbon usage?

Given the stupid fools in the House probably several light years in distance remember you have opposition from the refiners. CNG either needs the same tax breaks as liquid fuels or needs the liquid fuel tax breaks cancelled. Boone Pickens has been pushing this for 5 years now and is no closer than he was in 2008. A gallon of gasoline is about 125,000 btu's. So an MMbtu. NG is roughly equal to 8 gallons of gasoline or 7.246 gallons of Diesel.

AS for CHK, that reeks of Phillips Petroleum and Ada Petroleum. Back in the late 1940's and early 50's KS Adams was CEO and chairman of Phillips. His son Bud Adams (Oilers/Titans owner) owned ADA Petroleum. Phillips would go out and take all of the risk on wildcat wells. If Phillips "hit" ADA would buy up leases on surrounding property and do the infill or development drilling without the risk of the wild cat wells. CHK may or may not be the same deal but it does stink. The CEO is taking business opportunities that rightfully belong in my opinion to the CHK share holders.

I see a bunch of neophytes here waiting to be fleeced. For example NG is priced at Henry La. Piping it to Boston you lose 20% to compressor fuel and another 2 or 3% to lost and unaccounted for. Then add transmission costs on top of that. Operating costs and capital costs of storage depends on how many trips (injection/withdrawal cycles) are made each year. If only one you get to pick up 100% of the operating and capital costs for that MCF of storage space. Since that mcf has been processed for NGL's its heat value is usually 965btu/cu ft. So you lose another 3.5% that way. I worked for Tennessee Gas Pipeline, Amoco Gas Co and Valero transmission Co from 1978 to 1991 so I pretty well know where the bodies are buried. This is not a game you want to play if you don't know all the ways to cheat.


The politics is tough right now. We are facing opposition on the left from the greens. Most do not want any kind of Fossil fuel . . regardless how clean. These people are relentless and tightly connected to the Democrats.

On the right we are looking at opposition from entrenched coal. The politics there is extremely tough. They are dirty and they know it. But they are fighting, literally, for their lives. And they are tightly connected on the Republican side especially, but also with a few Democrats, as well.

All we NG folks have going is that we offer the best product. We are clean, we are cheap and plentiful, and we are AMERICAN!!

I'm most proud of that last one! I want to bring our young, very brave, soldiers home and ramp up domestic use of Western Hemisphere energy. We can do it! Uh, . . or maybe I should say "it can be done". I'm not so sure about the politics.

As part of a multi-decade investment, I'm personally familiar with the current US NG overhang. It is large and increasing.

If the glut does indeed exist, it bodes well for US manufacturing. Natural gas goes into most US manufacturing. The global prices of commodities are priced based on petroleum. So, while you cannot ship NG to outside US without LNG, you can make stuff like urea and sell it in the global market at significantly higher prices.

Skipping 49 Messages...
Look at that Oil continue flying: over $87 in just 3 trading days! USO from $29 to $34



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