Wt Nat Gas 2x Discussion Threads

[wig123] 23/2/2010 12:35

Perhaps a smaller stake at various levels 1.1, 1.05 with a stop around .95 or a heads or tails around 1.10 with a stop closer to 1.05


either way it is a pure punt and I cant see any reason why a sustained rise will occur anytime soon.

Might be better on the short side lol!


in fact might be safer to take it off my watchlist.

[andrewbaker] 23/2/2010 12:28

I confess to holding on too long last time and taking a hit. I'm not going back in until all the signals suggest an uptrend, and my stop will be tight, which makes a problem because with a 2x leverage, the underlying only has to move by half to trigger a stop: widen the stop, and the potential loss is bigger.

[wig123] 23/2/2010 12:17

Totally agree, managed to catch it last time although sold out to quick.

hoping 1.10 wont be to early an entry point.

[andrewbaker] 22/2/2010 13:02

You've got to let a decent uptrend develop here before going back in, and take a profit as soon as possible before a reversal wipes it out, which with this security, it can do, and very quickly.

[wig123] 22/2/2010 11:40

another shot around 1.10 perhaps??

[jl202] 17/2/2010 14:43

Thanks again AB. Interesting stuff,

jl.

[andrewbaker] 16/2/2010 17:19

jl202 -

Contango costs because it represents the cost of storage, interest and other things connected with providing a commodity at some future date on top of the current spot price. Each time a futures contract expires and is run forward into another, this cost makes the price that much more. It does put a drag on profits from commodities that are non-perishable and require storage, such as oil and natural gas, and require the spot price to rise over time too to cover. This plus daily leverage makes leveraged ETF on non-perishable commodities that much harder to profit from, and certainly unwise to hold for any prolonged period.

(A inverse {short} ETF benefits from contango, so if, eg, the oil price is falling, the short will do better and the leveraged short more-so: but volatility still affects the math, so don't hold for long.)

[jl202] 16/2/2010 15:36

Cheers AB. The old "harder to make back a percentage fall than the fall itself" scenario.

Is the other suggested issue re contango B$ then? I fail to see what that has to do with it, while LNGA is merely in a leveraged downtrend. Equally, any uptrend over longer term would spike the other way, but this is unlikely if gas isn't going to go ballistic any time soon,

jl.

[andrewbaker] 15/2/2010 15:55

jl202 -

Underlying security opens $100, close $75: down 25%.
LNGA in same situation: opens $100, close $50: down 50%.

Next day:

Underlying opens $75, close $100: up 33.3% and back to 100% of what it was two days before.
LNGA in same situation: opens $50, close $83.335: up 66.67% but still down 16.365% on price two days before.

Extrapolate that forward for a few more days, and even when the underlying has gone up over time, the leveraged instrument can still be down. The more volatile the price movements, the more the risk of this happening. I've chosen big price swings to emphasise the point, but all, even small, price movements over time are subject to the mathematics that occur when the leverage is on a daily close basis. Hence my warning that these instruments are only for short term trading where you think that a particular price trend will persist without reversal, or if there is, that the reversal will be small compared to the trend directional moves.

[jl202] 15/2/2010 08:54

AndrewBaker - 10 Feb'10 - 11:09 - 389 of 391

This is not a holding stock as it's leveraged on a daily close basis.

Can you give some more detail on this AB, how it works as an operation? Thanks for the NGAF tip. I'm only in for a couple of hundred dollars so its more a research exercise than anything else,

jl.

[andrewbaker] 10/2/2010 15:43

Raymund -

Yes, LNGA is good for short term trading if one likes the buzz, which is necessary to trade natural gas happily. NGAF good for the longer term conviction buy. But natural gas is a volatile commodity!

[raymund] 10/2/2010 15:14

AndrewBaker

Fully agree! Out myself on 8 Feb at $1.53, happy to bank 10% return after 7 days in LNGA. Put proceeds into LOIL when Brent $69+, oil now moving north and again watching like a hawk! Could go back into LNGA if I can pick a nice drop.

[andrewbaker] 10/2/2010 11:09

This is not a holding stock as it's leveraged on a daily close basis. It's very unlikely to get back to $2 with the volatility is has as every big drop, which are frequent recently, makes another mountain to climb. Any longer term holder wanting to make a profit from natural gas should get out at an interim price peak and buy into NGAF, which is the unleveraged ETF.

[raymund] 02/2/2010 19:59

From SHARES 28 Jan - Gas Fired

"Although prices in the US have slipped back in last couple of weeks SHARES remains positive on natural gas amid suggestions February could see a renewed cold snap. Further price support is likely to be found from growing industrial demand stateside. ...etc"

Got in again yesterday morning at $1.38, now watching like a hawk!

[brucie5] 02/2/2010 17:39

Any ideas as to when this down trend is likely to turn upwards? Its current shape is like a plane landing. Question is, is it still landing, or is it taxiing for take off? The scale of the decline over 18 months is staggering: from 80 to just over 1. (Chart starts at 50 at beginning of 2008.)

[jl202] 02/2/2010 17:03

hmmm I could always sell my holding, then we're sure to get back over 2 dollars,

jl.

[wig123] 21/12/2009 11:24

Myself, I'd be inclined to hold, although keep a close eye on action up to LSE close. Although that may not be the best indicator as market could pump it up for a fall.


Heads or tails ?

[easyglider] 21/12/2009 11:17

yes agreed, this ETF is not a long hold. I have a position at the moment with reasonable profit but what I am concerned about is that the NG storage figures are out Xmas Eve at 1530 local time but the LSE closes at lunch time and does not re-open till Tuesday. Trying to way up if its worth holding over Xmas...

[wig123] 21/12/2009 11:13

Probably a good indicator to go long :-)


I think the recent rise may have had a tad to do with the Russians wanting to set up an OPEC style cartel for gas supplies. Can't remember where I read it, but price seemed to jump around that time.

Must admit I don't have a clue how it correlates to NG/futures. Pot luck really if you get it right. I tend to take a reasonable size trade for small movements, rather than looking for the long haul.

[wig123] 21/12/2009 10:51

quite possible, especially if this bloody cold snap continues ;-)

[easyglider] 21/12/2009 10:46

does anyone see this going to $2.00 this week or next as the contract expires on the 29th?

[jl202] 21/12/2009 09:17

Expect some resistance here, a break to 1.9 would be encouraging,

jl.

[jl202] 18/12/2009 15:11

Won't last ;)