Natural Gas has been trading in a relatively tight range since July of this year. After experiencing a massive rally, followed by massive sell off…. the market is trying to find fair value ahead of the fall season where many states do use natural gas for heating as well.
Natural Gas futures CAN be a very explosive market, both ways. The contract is sizeable ( $100 per point either way, 3.970 to 3.980 = $100 per contract) and I have seen some very powerful, fast moves over the years.
At this point I must admit I do NOT have a directional bias for this market and will look to trade the ranges by trying to sell the upper bands as seen on the chart below and buy the lower bands as seen in the daily natural gas chart below. Until the market can prove to me that it can break out of the channel that will be my game plan. If you are looking to use similar strategy make sure you place stops above the upper band and below the lower band as confirmed breakouts can be fast.
Last but not least if you are an experienced option trader, I do like selling puts on moves down but highly recommend advising with a broker to understand the unlimited risk associated with selling premium. You can read more about options strategies here.
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Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
About Ilan Levy-Mayer
Ilan Levy-Mayer has been a commodities broker for over 15 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Broker at Cannon Trading Company.
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