Wt Nat Gas 2x Discussion Threads

[pbracken] 11/9/2009 20:54

Gas ended 8% down or so. Short of a big bounce in early trading Monday, that'll mean - as sure as eggs are eggs - LNGA will open below 150cents. I'll take a view then, but probably I'll be buying the dip early on.

[cagey76] 11/9/2009 20:23

wookie, you chucked 15k at something at the bottom that has started rising, doesn't sound so bad to me.

[lyonst5] 11/9/2009 18:06

pbracken, yep good point i missed, i've been used to the way oil moves with the market.

[navyan] 11/9/2009 18:02

pbracken, do you see this open below 160cents on Monday then?

[wookie77] 11/9/2009 18:00

what would a 7% decline mean for LNGA

[pbracken] 11/9/2009 17:58

Gas has dropped further, lyon. But the gas market is largely unhinged from the performance of the wider energy sector - hence it has fallen whilst other commodities have been rising.

[lyonst5] 11/9/2009 17:53

IG Index have natural gas down about -7% since the uk close, i nearly lept into this today, but the toppy share markets look to correct soon and would hammer the energy sector in general. IMHO

[redprince] 11/9/2009 17:44

i tried explaining this all last week-to little avail.
Be aware that the leveraged etf is best suited to intraday trading for reasons
explained.

Also supply IS NOT falling yet-that may prove when it actually happens to be the big catylyst for price movement.That is likely to be some months away if not longer.

[wookie77] 11/9/2009 17:42

Surely that means these could never hit 4 dollars then?!

[pbracken] 11/9/2009 17:35

Yes, Wookie. But remember that a fall in the price of gas will cause LNGA to relinquish value at twice the rate, and because a 100% recovery from $1 makes only $2 you can see why some investors despair when the contango works against them: it's like a bungy jump on a rope rather than an elastic band. Sure, they'll be a bounce - but one with none of the spring....

[wookie77] 11/9/2009 16:47

Thanks pbraken. I presume though it drops at the same rate that it rises in conjunction with NGAS albiet leveraged.

[longshanks] 11/9/2009 16:13

thanks for that excellent explanation pbracken - I can see how this is actually more of a "trading" position to hold than a long term bet on the price of gas. The penny has dropped.

[wookie77] 11/9/2009 16:04

Thanks.....So whats the benefit of buying this over NGAS?

[pbracken] 11/9/2009 16:00

Ah, that's easy to explain. LNGA was rolling over foward gas contracts at a huge profit - because the price of gas was leaping upwards. As gas turned downwards, the forward contracts bceame loss making, and because of the leveraged quality of the fund those losses were multipled. Gas kept on falling - amazingly so - and the fund just kept hemorrhaging dosh. What you have to realise is that there is no linear relationship between LNGA and the price of gas.

Now, to recover to $80 get this: the price of gas would have to rise to around $50, and that ain't goin' happen.

[wookie77] 11/9/2009 15:51

How come this was $80 last year then?

[pbracken] 11/9/2009 15:40

No chance of a 70 bagger Wookie; even if NG rises to $10 (which is possible I grant you) then LNGA will only rise to 450cents max (IMO). That would represent a 400% increase from its recent low (fab return of course) but the contango effect will prohibit any further upside.

Still, I'm not complaining. And the reason why I especially like LNGA is that it's not a company and so is a genuine supply and demand play - the fortunes of the FTSE and DOW matter not one jot.

[wookie77] 11/9/2009 15:29

indigo. Downside is limited. Up side on fully recovering gas prices eventually nearly a 70 bagger!!! This opportunity is no different from being able to buy Barclays at 48p except less risk but bigger reward.

[longshanks] 11/9/2009 15:27

The current price of gas is far too low. Demand is burgeoning and supply dwindling. I think I need a few more of these...

[indigo85] 11/9/2009 15:23

The price has moved up many times in the long, downward trend; how do we know that this is not just the usual ebbing and flowing rather than a reversal of trend? We don't, I guess.

[jl202] 11/9/2009 14:10

longshanks, $80 no less ;)

jl.

[jl202] 11/9/2009 14:04

Apparently has to be over the phone as dollar denominated...

jl.