Thursday, March 11, 2010

Profit From UNG Recovering or Crashing Further

Natural gas inventories were released today showing a drop of 111Bcf, very much as expected. Amount in storage is 1.626Tcf, 4.1% less than last year.

Here is the chart comparing 2009 and 2010 within the 5-year average channel. Please remember that the channel was adjusted upwards late last year due to the record amount in storage in 2009.

Whether the dreadful UNG ETF continues to crash or it recovers from here is the big question. Our favorites vehicle for these situations, straddles are shown below, for both March and April.

Computed with StraddlesCalc Tool, which indicates the maximum move needed to achieve a profitable outcome. For March this is around 5%. Expiration is next week, so straddles must be used and not strangles, which are used instead for April. Given the very low price of UNG, these are getting tricky.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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