Good morning Traders,
Following up on our Natural Gas Trade last week, things were looking good – with UNG bouncing into our entry and heading lower. The recent price action has been consolidating for the past 4 days. What happened?
Basically we saw a huge spike in PUTS being bought on UNG – to the magnitude of 5-6x Calls – meaning someone was making a large bet to the downside. On a contrarian basis, that suggests the crowd is starting to lean to the downside. As you can see by the spike above.
That being said, options activity doesn’t control price action by any means, though if it’s very crowded it has some influence. We’ve seen spikes in the past just ahead of significant moves lower as well. So we’ll wait and see if this is smart money positioning for more downside and if the trend continues.
Here are our previously recommended options again:
What this is saying is that a 9.87% move lower in UNG will return 100% on an options trade. If you want to spread out your timing risk, you can pick up the April options.
If you want to see more research, here’s our data on Natural Gas: Note these links will automatically update every weekend with our current data. You need to be a subscriber and logged into the website to see the research. Any problems, please notify firstname.lastname@example.org
- o NG – UNG Timing Indicator
- o NGud – UNG Up Das Less Down Days Indicator
- o Pung – UNG Put/Call Ratio
- o NGov – UNG Natural Gas Options Volume
- o NGovr – Natural Gas Option Volume to Open Interest OV Ratio
- o NGovr2 – A look at modifying the OI OV to remove the previous day’s value – giving only the increase or change in OI OV…
- o NGoi – Natural Gas Open Interest Put/Call Ratio
- o NGoi2 – Natural Gas PCR to OI PCR
- o Dollar Seasonality