KT, thanks for your encouragement. i am a rank newbie in the land of commodities, and only bothered to open an acct in order to establish some long-term energy positions and perhaps to hedge foreign bonds from time to time. i think i am likely to lose whatever money i try to gunsling with on front-month options, but will chalk it up to "learning".
btw, i noticed some bearish talk here on natural gas a few days ago. personally i do not have a clue what gas is going to do in the next month or this winter, but longer term, it seems clear that North America is running out of it and LNG is not coming online that fast, nor will it be that cheap (and people forget that we will need to compete with many Asian nations for LNG supplies).
therefore, i have accumulated some longer term contracts, specifically the Dec 2007 and 2009 contracts, which are in considerable backwardation (a factor perhaps not considered by those who view the market as complacently bullish). i really don't know why anybody would sell 2009 gas contracts for $4.70, but i have taken the other side of the trade.
(parenthetically, i recall reading that some producers like Encana have unfortunately hedged production at prices well below market, which feeds into my general theory of not liking to treat producers as proxies for their respective commodities.)
btw, there is a forthcoming book on this subject which i am looking forward to reading as soon as it is released--i may end up building a bigger position in the far-dated contracts if it is sufficiently persuasive: High Noon for Natural Gas: The New Energy Crisis by Julian Darley. amazon.com
in my experience, the contracts are quite illiquid--much more illiquid than crude contracts with like expiries. |
