Wednesday, September 16, 2009

UNG Wild Straddles

UNG is trading close to $11.48, at mid point between strike prices (11 and 12). Below are the strangles for both September and October.

Septembers' are wild and extremely risky, but they offer the greatest potential for gains. Tomorrow is inventory report day, and the maximum move required is 6% (and over two days left to expiry to with some room to maneuver), which UNG happens to do all the time. The average UNG daily swings over the last 4 days has been 8.9%.

EDIT: UNG finished the week at $11.64, in the middle of the strangle, thus making the September strangle worthless. They were indeed too risky. This is a clear example of how options are risky and should be treated with much caution.

This is not advice. As always, please make sure you do your own due dilligence.

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