Wednesday, September 2, 2009

How to Profit From The Coming Volatility in Natural Gas

In our post yesterday Mr. Rule states that in the spring on next year he expects to opick up the pieces from a collapsed industry, after many companies will go bankrupt.

There are many possible opportunities to profit from the coming volatility in natural gas. As usual they depend on timeframes. Here are some simple ideas:

1 - Short gas producer companies that are leveraged (short term), that have any loans
2 - Wait for around April next year to pick up the pieces, the winners may rise 10x
3 - Do not buy any junior company that has debt
4 - Going long the commodity itself remains a trade for very short term, hurricane specific activity
5 - Short the commodity on any hurricane spike.
6 - Buy straddles and strangles on UNG and, or any junior company with options (we will keep publishing straddles here regularly)
7 - Oil Sands producers will be paying peanuts for the massive amounts of natural gas they need. They will benefit and their profits will rise, if oil prices remain stable.

The question to find out now is which are the leveraged companies. Stay tuned.

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