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Nat Gas Bullish , not Bearish!


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Nat Gas Bullish , not Bearish!

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  #71 (permalink)
 jokertrader 
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SMCJB View Post
Cross exchange arbitrage, cross product arbitrage, market making less liquid products, mean reversion butterflies and spreads. Generally high volume, low margin & very low risk.

I can find info on calendar spreads.. and with those.. front month moves more than backmonth.. so decide to buy/sell and seems directional..

With options i understand flys.. even risk on one side etc.. and main component is theta..of course can do the same with futures options as well.. BUT

I dont think why futures flys are used.. can u provide an example
what is the advantage there? and in what kinda situation would u use?


also if u know of any good books/references for energy spreads.. would be much helpful

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  #72 (permalink)
 
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 SMCJB 
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jokertrader View Post
After all these years and reading and reading and trying maybe there is something I can learn which is systematic and low risk. I'm starting to read up on spreads but even that has risk. Maybe I will get the right opportunity one day. I've read though autospreader not as profitable these days

It exists but its a very very small space. I've been trading this stuff since electronic trading began over 10 years ago. Back then, understanding trading, and computers, and being slightly ahead of the curve, meant it was easy making money off of ineffecinecies. As time has passed more and more people have realized this and the arms race begun. Today you can still make money on what I was doing 12 years ago, but only if you have the fastest hardware in the industry and a propietary deal with the exchange. I have niether. As such I have continued to innovate and moved further and further down the liquidity curve. Hence why a lot of what I do now is in less liquid products. It's not worth the new big guys efforts to even compete in these products. But yes 10 years ago a good autospreader was like buying a license to print money - just like having a badge in the pits. Today a good autospreader does little more than get you a reasonable seat at the table.

jokertrader View Post
I can only learn what someone will teach me. In this business of shysters it's tough to make oneself vulnerable just because u want to learn. I would like to make this my second profession but am too late to work as an associate starting from scratch.Living near NYC shame if I cannot find the right mentor.

I've worked hard to get where I am, but the second biggest reason I am where I am today is experience. I've been in the energy trading arena now for 27 years, and as you can imagine in that time I've seen a lot of things. That can't be taught. I can show you what I did 12 years ago but that information is useless today, I can show you want I do today but that would a) just hurt me and b) be useless to you in 6 months time when everything changes again, unless you know enough to change as well and ideally be ahead of the change, and that can't be taught.

Anyway who are these "shysters" you talk of?

jokertrader View Post
Spreads and arbitrage are not something I can pick up on my own however I try unless I can dedicate the time in the right direction and with the right person. After many years unless I can find a low risk strategy not sustainable being a directional trader to get the confidence to increase size. Most who do it here have great money management, willing to take the stress and the luck. So not really sustainable or the best way to grow as a trader. Increasing size should come up as a boring step in a low risk method which has more than a small edge that tech indicators give u.

There's directional spread trading, which is higher risk, and probably more fundamental in nature and then there's statistical or arbitrage style tradiing. The later tends to be mean reversion in nature, which throws many of the traditional money management rules out the window as you increase your position as it goes against you. As a rule I think trading is a fools came for the majority of people. Commissions and slippage will mean that the average trader will lose. When you start trading spreads, commissions are double, and slippage maybe the same, possibly worse. Hence unless you have a better understanding your more likely to lose than if you were just trading outrights, it will just be a slower death. Saying that I think it's easier to have an edge in spreads than it is in outrights. Why? Well when you trade spreads you are trading curve shape. The curve though moves based upon order flow at certain parts of the curve. Large producer selling Cal 20 WTI? The bank getting the order is sellling Z19 and Z20 (and maybe M20) against it. Hence they get depressed versus other points on the curve. You take advantage of that. Then a refiner comes in to hedge Q1'19 heat cracks. Now Z18 gets pushed up. So now your selling Z18 versus other points on the curve. Rinse, repeat. You obviously need to know, which spreads to trade (ie value) in each situation, but its doable.

Twenty years ago, trying to do what you want to do in NYC would have been easy. Today I'm not sure it's easy anywhere, but I suspect it would be easiest in Chicago.


jokertrader View Post
I can find info on calendar spreads.. and with those.. front month moves more than backmonth.. so decide to buy/sell and seems directional..

With options i understand flys.. even risk on one side etc.. and main component is theta..of course can do the same with futures options as well.. BUT

I dont think why futures flys are used.. can u provide an example
what is the advantage there? and in what kinda situation would u use?

also if u know of any good books/references for energy spreads.. would be much helpful

In options a butterfly (or iron fly) is a straddle vs a strangle, ie wings vs body. Since F = +C -P n iron fly can easily be translated into an all call or all put fly, which is a call spread vs a call spread. Generally trading option flys is a bet on volatility.

Futures flys are spreading spreads. ie Buy Jan/Feb, Sell Feb/Mar or +1 Jan, -2 Feb, +1 Mar, or body (G) and wings (F+H). Why would you do this? Well if you think Feb is to high you might sell it versus Jan and Mar. Why Jan and Mar and not just one? Well as you said, spreads often move directionally with the market. So if you sell Feb and buy Jan against it, and the market moves down, you could still lose money even if you are right. But if you sell Feb and buy both Jan and Mar against it, as long as your right, shouldn't matter which direction the market moves.

Now imagine that it's not Feb that you think is expensive, but the Jan-Feb spread. So now you sell Jan-Feb and buy both Dec-Jan and Feb-Mar against it. So your position is +1 Jan, -3 Feb, +3 Mar, - 1 Apr, aka a Double Fly. Why you don't hear about double flys much in Crude, and pretty much never in Natty, in Eurodollar's it's actually listed as an exchange traded single product.

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  #73 (permalink)
 jokertrader 
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Still reading but wow thanks for the reply


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  #74 (permalink)
 
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 SMCJB 
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From the CL thread

SMCJB View Post
If you think your interested in this type of trading you may want to take a look at the following video series. They are presented by Doug Huggins of Quantitative Markets Analysis. They date back to September 2014 and were originally focused on the ICE Gasoil futures specification change. They contain a lot of information regarding market neutral futures strategies in the ICE Gasoil and Brent futures complex's.

Forum (Session 4) 9/2014 https://sites.mhub.tv:443/Site.aspx?s=f585bc3a-058b-4570-a197-a3a900d569ca&v=f3bf14f8-9624-4caa-b052-a3ab00a29f60
Update 11/4/2014 https://sites.mhub.tv:443/Site.aspx?s=420b54cb-a997-4ec8-9662-a3d900c622d0&v=dbe2878b-2477-417f-8d91-a3d900c658fb
2 11/18/2014 https://sites.mhub.tv:443/Site.aspx?s=42880d9b-a225-462d-a262-a3e700fbd7d9&v=c33425e7-9a08-4191-8ad6-a3e700fcb5a9
3 12/2/2014 https://sites.mhub.tv:443/Site.aspx?s=f1f5a162-6c3f-4c97-8c31-a3f500be0d82&v=e490b1b9-fdc4-4308-a73c-a3f500bea810
4 12/16/2014 https://sites.mhub.tv:443/Site.aspx?s=f1f5a162-6c3f-4c97-8c31-a3f500be0d82&v=e490b1b9-fdc4-4308-a73c-a3f500bea810
5 1/21/2015 https://sites.mhub.tv:443/Site.aspx?s=e0130576-1aef-4687-ba90-a42700ecf084&v=8db10e0d-7a17-4e04-9b3a-a42700ee4c34
No #6
7 3/19/2015 https://sites.mhub.tv:443/Site.aspx?s=ae9d2afe-208e-4b98-9123-a46000ca849a&v=c825b7a0-34d0-4f3d-81fd-a46000f8b52a
8 4/15/2015 https://sites.mhub.tv:443/Site.aspx?s=70b0c05a-bb89-497a-96c2-a47a00cb48da&v=601e827b-f575-4adb-a78f-a47a00cd13b1
9 5/5/2015 https://sites.mhub.tv:443/Site.aspx?s=4cac72bf-d928-4654-be74-a48f010c1d05&v=74683637-2680-4336-8762-a48f010cb1c3
10 6/15/2015 https://sites.mhub.tv:443/Site.aspx?s=778748ca-6f59-4f83-9ebb-a4b800f38e65&v=6f9fe2c5-d9fc-4ce2-93a2-a4b800f65237


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  #75 (permalink)
 jokertrader 
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is this just a temp bounce for the next shoe to drop with NOAA 8-14 day forecast being above average

Are there any reports/views that are useful for NG (i like Agweb Chip flory for grains.. more of a talk but can gather what real farmers/traders think)

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  #76 (permalink)
 jokertrader 
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These links dont work for me either on PC or phone

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  #77 (permalink)
 
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 SMCJB 
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jokertrader View Post
Are there any reports/views that are useful for NG (i like Agweb Chip flory for grains.. more of a talk but can gather what real farmers/traders think)

Unfortunately I don't know of any good free reports. Many of the bank analysts produce some decent research but it's often a little dated and not easy to get on their distribution lists.

jokertrader View Post
These links dont work for me either on PC or phone

Sorry they obviously removed them. I've emailed ICE and the person who made them to check whether they are available in a different format. Shame because they were the best 'how to relative value trade in the energy markets' I've ever seen.

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  #78 (permalink)
 jokertrader 
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I think i have access to that

Thanks.. would be great if we could get to see those videos

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  #79 (permalink)
 jokertrader 
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so NG March is at 2.67
Spot is way below.. in fact lost a few cents.. 0.11 at Henry Hub

April is at almost 2.8

What does this mean? Does this mean that April at some point has to reach march ending price of 2.67? or this is not a real gap?
Usually i thought they converge on the last trading day..

Does this mean that April will be a good short.. ?? he he

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  #80 (permalink)
 
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 SMCJB 
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Settlement was 2.627. That was the weighted average of all NGH7 trades today between 1300 and 1330 Central on Globex. If you take physical delivery of a contract the gas is delivered rate-ably over the entire month. With the current shape of the curve, expectations are that prices will be higher at the end of the month than at the beginning of the month. For what it's worth by the end of the day (4pm), the swing swap was trading 2.5c over settlement.

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