Monday, August 17, 2009

Naural Gas: October and December Options are Very Attractive

The ETF tracks the price of natural gas futures on the Alberta market. It now offers options, both calls and puts which trades on the Montreal Stock Exchange (or through the TSE). Some of the options are very attractive today.

Current price: $5.26
October 5 calls: $0.60, move required is 6.4%, current OI is 0, 32 days to expiry
December 5 calls: $0.80, move required is 10.26%, OI of 40, 123 days to expiry

In particular, 123 days to expiry is a long time for a 10% move required. Hurricane season will be over by then and winter prices will be in effect.

Open interest is extremely low, but this will most likely change by October and December. trades in CAD dollars, which is great for currency hedging. description (from the Claymore site):

"The Claymore Natural Gas Commodity ETF has been designed to track the performance of the benchmark NGX Canadian Natural Gas Index, less fees and expenses. The ETF will provide non-leveraged exposure to the Alberta natural gas market, by investing in physical natural gas forward contracts. The ETF will not use leverage and targets a 1:1 relationship between assets and natural gas exposure. In addition, the ETF will provide this exposure without being directly involved in the exploration, operation, reserves, engineering and management risks associated with an investment in entities that explore for, produce and sell natural gas. "

"Benefits of using the Claymore Natural Gas ETF:
.The ETF is an easy way to gain natural gas commodity exposure.
.ETF can be used as a hedge against rising energy costs.
.Backed by physical natural gas. The ETF intends to be backed dollar-for-dollar by physical natural gas contracts.
.Access to a market with high barriers to entry.
.Non Leveraged Exposure.
.Experienced investment Advisor.
.Low Management Fee "

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