re: Why UNG?
Hey jr,
I think we've covered this 4-5 times, but anyway...
I'm mainly trading options so UNG is my vehicle of choice.
Additionally, I want liquidity pre & after market, and
I can't get that with GAZ. That being said, I have no
problem with GAZ and if you're not trading options, use it.
UNG is transitioning to "Total Return Swaps" to minimize
the negative effects of rolling over futures contracts,
and to appease concerns of the CFTC.
It's still the vehicle of choice for many large funds
for the reasons I mentioned. It may, or may not regain
it's premium, but I think the swaps will smooth things
out over time.
Options-wise, I like "selling Puts" to establish a position,
when trying to find a bottom, and then buying calls for leverage
on the way out.
And given the weakness of the underlying real economy,
I want to buy "time" so 2012 LEAPS are my preference.
I give up some leverage to buy that time, but it gives
me the opportunity for either demand to come back, or
for the falling rig count to help bring supplies back
in balance to demand.
On Put sales, you can get a h-u-g-e near 40% premium to strike
on the Jan 2012 $12 LEAP puts ($4.65 premium with 8,000 open
contracts), and a $3.25 premium on the more conservative
$10 Jan 2012 LEAP put (which has 2,000+ open contracts).
Good luck,
SOTB |
