Excerpt: "The funds and other large speculators raised their net-long positions, or wagers on rising prices, in four gas contracts by 94 percent in the seven days ended Jan. 4, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report."Bullish bets on gas when these gas shale formations (Haynesville, Marcellus, Bakken, etc.) seem to depict the entire subterranean US as one large underground storage facility.
Monday, January 10, 2011
Here We Go Again: Hedge Funds Almost Double Bullish Gas Bets on Cold Snap
Story at Yahoo!.
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7 comments:
I would think the best way to capitalize on nat gas in this case (aka increased supply) would be to buy stock in good nat gas companies. My reasoning is that increased supply of nat gas plus increased usage/demand should equal great profit margins for those companies. Considering how much imported oil is skewing our trade deficit I think Obama is going to make nat gas usage more attractive this year and going forward. He's definitely got his eye on energy, b/c he just mandated that the pentagon ONLY buy solar panels from US companies (not china). Just my thoughts though!! What do you guys think?
Mario,
doing the futures in gas is what I believe did in the Amaranth hedge fund some years ago.
I remember at the time Mike mentioned on his show that he read the guy based his trades on a weather report that indicated high amounts of hurricanes in the Gulf of Mexico or something like that.
I believe he lost billions. To your question I have to think there are better ways than the futures to "invest" in gas.
Resp,
yup agreed. I didn't know about Amaranth but nat gas just seems so volatile to me that it's literally dangerous like that. And yes I agree...you literally CANNOT "invest" in any futures commodity simply b/c of the law of supply and demand...haha!!!
Do you (or anyone else) think investing in nat gas exposed composed the best way to get in on nat gas...or would you say an ETF or something else?
cheers!
sorry I meant "exposed companies" not "exposed composed." haha!! :D
No Mario that UNG etf has been a disaster, they lose $ every month with "the roll". The may be considering a reverse split.
Maybe pipelines/storage companies?
Ive heard Chesapeake does a lot of derivatives so who knows how that could work out (Enron?)... the major oils have some gas exposure (some more than others)
As they say "consult your financial advisor" (and good luck with most of them too!)
Resp,
As per Global investor charts showing that the only thing you can track on natural gas is the fact it is the most volatile of all commodities, and the cycle has been for the price of futures to drop to a low extreme and than to ramp to a high extreme, due to the fact you cannot store it. So if demand drops off for a long enough time span production shuts down. Than the price spikes due to lack of inventory, and hence a ramp up to an extreme high. If you want to catch the move best to roll over a futures contract every month and wait for the spike.
can't store nat gas...great point Bob. Thank you for sharing that. :D
I don't understand how rolling into a new futures contract would help any though (it is probably me not understanding correctly)...I mean the volatility is still there in nat gas right? Or are you suggesting to trade in a later contract with less liquidity? I would say that is adding danger up on danger imo but again I am probably not understanding what you are saying correctly.
Cheers!
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