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UNG short straddle 2015 Dec monthly

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I just opened my first ever short straddle position. Until now, I’ve been using short strangles. The straddle is similar, except that it uses the same ATM strike prices on both put-call legs.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 11/09/2015 UNG
(dec)		 9.66 1 short 10 P 0.83 0.54 39 $134 $1.50 – –
1 short 10 C 0.52 0.46 $1.50

Trade reasoning

After thinking a lot about my huge loss in NGZ5, I decided to alter my trading strategy a bit. In short, I will open more positions, which will be much smaller than the previous ones. I’ll write a separate post about this later.

Anyhow, UNG is an ETF which follows natural gas prices. Since gas is at a price extreme, as well as at high volatility, it makes since to open a straddle position.

Tasty trade has lots of research on short straddles and flying V’s, and they recommend profit taking at 25%. That is my goal with this trade.
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/NGZ5 short strangle

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Today, I opened a short strangle on the upcoming month contract of natural gas.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 10/09/2015 /NGZ5
(dec)		 2.73 2 short 2.3 P 0.022 -0.11 46 $900 $7.42 pending pending
2 short 3.3 C 0.023 0.12 $7.42
2 11/04/2015 /NGZ5
(dec)		 2.293 2 long to close 2.3 P 0.130 -0.48 20 -$1700 $7.42 pending pending
3 11/11/2015 /NGZ5
(dec)		 2.284 2 long to close 2.3 P 0.001 -0.01 13 – $7.42 closed -$1720

Trade reasoning

The supply-demand equation in natural gas has been really balanced over the summer, with no sharp moves in either direction. The price of NG started trending lower towards the end of summer, as supply is strong.

All else being equal, the autumn months are slow for NG. It’s not hot enough, nor cold enough to dig into supplies.

Winter is approaching though, and as we know, NG reacts with harsh volatility to weather patterns during the winter, if supplies are strained. Right now, supplies are strong. Surpluses now stand at 155 Bcf versus the 5-year average, and 443 Bcf greater than at this time last year. This year’s El Nino is a strong one, so meteorologists are expecting a mild winter. If this hold up, it should stay relatively calm for NG as well.

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/NGX5 short strangle

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Today, I opened a short strangle on the upcoming month contract of natural gas.

The details of this trade are as follows:

Date Inst. Mark. # L/S Strike C/P Price Δ Days Max profit Comm. Close P/L
1 8/31/2015 /NGX5
(november)		 2.76 2 short 2.3 P 0.018 -0.09 57 $980 $7.42
2 short 3.2 C 0.031 -0.16 $7.42
2.1 10/02/2015 /NGX5
(november)		 2.44 2 long to close 2.3 P 0.054 -0.28 25 – $7.42
2 long to close 3.2 C 0.004 0.03 $7.42
2.2 10/02/2015 /NGX5
(november)		 2.44 3 short 2.1 P 0.013 -0.09 25 $510 $11.13
3 short 2.9 C 0.010 .08 $11.13
3.1 10/27/2015 /NGX5
(november)		 2.14 3 long to close 2.1 P 0.024 -0.40 1 – $7.42 Put closed
Call expired		 -$210
3 expired 2.9 C 0.000 0.00 $0

Following my previous successful trade in NG, I’ve been looking at it ever since.

Trade reasoning

/NG has been trading in a fairly narrow channel for several months now. The summer hot season is more or less over, so demand should not be a catalyst towards higher prices. Even if an unexpected heat wave comes, it won’t raise demand as much, as to put my strangle in jeopardy.

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/NGU5 short strangle

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My newest trade involves trading options on natural gas, symbol /NG. I’ve been studying how the natural gas market works, gathered my findings in my NG trading guide, so I’m semi-confident in my knowledge of this market.

The details of this trade are as follows:

Symbol: /NGU5
Status: opening trade
Strategy: short strangle, SEP 15 2.5 P /-\ SEP 15 3.3 C (market at $2.895)
Contract size: 2
Days to expiry: 36
Max profit: $820

I sold 2 contracts each, as selling in multiples of 2 allows for more room to adjust if needed.

Trade reasoning

The fundamentals are mixed. Hot weather is coming in the US, which raises demand, but supply is also exceptionally high, as seen here. Last Thursday, the EIA reported a net increase of 99 Bcf from the previous week, with stocks 653 Bcf higher than last year at this time, 73 Bcf above the 5-year average of 2,694 Bcf.

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