All I know is that in January, NG was in backwardation, like it is now, but not as much. The spread right now is $1.23. Then, it was about 60 cents.
On the day the February contract expired, the March rushed up to a price about 20 cents less than the Feb was. It only took two days, from there, for the March to reach the same price that the Feb was.
Of course, since then, the March has exceeded, well every level I thought it would have.
hhh, thank you for this guidance. I suppose I'm a bit overcome with the emotion of loss. But, your advice of following the RSI is valuable.
Still, NG seems to be able to stay overbought, these days, for longer than I've ever known, which is only about three years. I study everything available, but I truly blew it, this time.
Eh, sorry. Still getting over it.
DGAZ isn't rolling over, the front-month contract is. DGAZ rolled into the April contract two Thursdays ago.
The spread between the March and the April will converge. Maybe not 50/50, but the April is moving up.
On Thursday, the 27th, you're going to find out how much it finally moves.
And it's going to be a lot.
Good luck to you!
Thank you for your kind thoughts. I understand that you're underwater on your trade, like I was.
All I can say is, if you think you can hang with the trade, and you really are either capable of getting some distance or can somehow be careless enough to forget about it, you might come out at least slightly ahead.
If you're by yourself, it can be too consuming. Ah, I only told my wife when I could barely handle it anymore, and thankfully, she stood by my decision to get into this trade in the first place. Without her understanding, I would have been in bad shape.
In a way, holding onto a losing trade, especially one that went down so fast, is like trying to hold onto a hot piece of steel.
For some reason, you tell yourself you can do it. But, it just keeps burning through you.
Hey hhh, yeah, I am thinking about getting back into DGAZ, but at a much lower price.
My timing was way off. I mean, what was I thinking? The middle of winter, and a cold winter at that, and because there's a bump up in the price of NG, around the third week of January, I decide to go short?
I truly was an idiot. Probably still am.
But, I'm still here, still have some money to trade, and I'm able to regroup.
Have to be more careful. Smarter, somehow.
This one made a mark.
hhh, until Wednesday, I was holding, for me, 45% of my trading capital, well, it was 45% originally, in DGAZ. My cost basis was $5.50. I sold at $3.10. I was stupid, stubborn, and was more than willing to believe all of the posters that also believed that NG was at a tipping point, essentially just hours away from breaking down.
Well, it wasn't.
I don't use stops, because I tell myself that you have to be more flexible trading triple-short or long ETFs and ETNs.
But, I finally sold. For a horrific loss, for me.
There's a weird kind of relief that happens when you sell at a tremendous loss. Can't really explain it, but it's very cathartic, for a few days, anyway.
Then, you realize what you've done.
It can be pretty hard to take.
While it's been brought up on these boards several times, I don't think a lot of people are aware of how severe this rollover in NG contracts is going to be. Please notice that I said NG contracts, not the contracts DGAZ holds, which is 100% April.
They are two very different things.
While DGAZ and UGAZ currently hold only April contracts, the front, or primary month at the CBOE holds most of the sway in the "public" markets. By public, I mean the market that the media comments on and follows. The public markets, apparently, think the average Joe is too ignorant to be told about contracts. So, the price of NG is almost always described in terms of its front month price.
The problem this creates for people who want to trade DGAZ or UGAZ is they start to only think in the same terms. That secondary month is always way out in the future, and is believed to be of little concern.
Well, get concerned!
When these contracts roll on the 26th, a lot of people are going to wake up on the 27th and say #$%$ happened!?!?
UGAZers are going to love it. Those guys are going to be, maybe literally, dancing in the streets.
DGAZers, though, not so much.
I'd say the price of DGAZ is a mix of connectivity to the price of NG and the levels and directions of volatility. While the price of DGAZ is linked to the contract month it holds, if the volatility is negative for DGAZ, that is, the price of NG goes up rapidly, this hurts the price of DGAZ, and vice versa.
So, if NG rapidly goes down in price, producing positive volatility for DGAZ, it will go up more than if the price of NG slowly fell.
Kind of makes me want to stop trading this stuff.
The April contract is trading at $4.896/mmBTU, which is about 20 cents higher than it was on Tuesday morning. This spread is going to reach 0 on Wedneday, Feb. 26th. With the March contract at $6.11, my guess is that the March comes down, while the April goes up (duh?).
The problem is, how will this change affect DGAZ?
I think it forces DGAZ down nearly a dollar from where it is now.
More to the point, I'm thinking the March and April contract prices probably meet in the middle, or about $5.35 to $5.40.
At the end of January, the spread wasn't as large as it is now, but even though the roll for DGAZ from the primary month to the secondary month occurs in a five-day period, beginning on the fifth business day of each month, if these two months are severely in backwardation, as they are, it's the options and contract expirations near the end of each month that really bite into the value of DGAZ and make UGAZ go up.
If not lower... the spread between the March and April contracts, as of 11:38 (delayed) is $1.175. I've never, ever even heard of a spread that large between NG contracts. DGAZ is going to get slapped hard.
I just sold 3,300 shares of DGAZ for $3.10. My cost basis was $5.50.
I'm in a kind of shock, I think.
Man, I am this is insane! I'm in disbelief. I almost gave in, tonight and sold (DGAZ). But, it's got to break down. It just has to!
natgasinv, I apologize for calling you a liar.
I should have checked it out better than I did. Guess I got caught up in the bull/bear argument. For what it's worth, I'm way underwater on DGAZ, and I'm trying to figure out a way to trade back and forth in the next couple of weeks to minimize or eliminate my losses.
I can see the sense of your position, in that having an ever decreasing supply level of NG really should increase prices. But, I made the wrong move, and I'm just looking for a way out.
Wish you the best of luck!
Two medium-term (two to three month) scenarios appear to be possible for DGAZ:
1. The upcoming warmup and the end of winter is priced into the April contract. It won't go much higher than it is now, so DGAZ will stabilize around this price and begin to rise into Spring. The producers see the benefit of selling more NG now, while prices are high, which causes NG to drop due to increased supply.
2. Winter isn't ending, the NG stockpile shortage is going to increasingly become a factor, and the price of the April contract will rise from here, causing DGAZ to drop further in price. Producers have all agreed to maintain low production levels to keep prices high.
As much as I hate to admit it, as I'm deeply underwater on DGAZ with a $5.50 cost basis, I'm thinking winter isn't over, yet. So, scenario #2 "seems" like the most probable.
Liar. The article you pulled the term "Sudden Stratospheric Warming" from is dated December 31, 2013.