This is just unbelievable: the Energy Department is about to make major revisions to its natural-gas production data after "finding it has been overstating output". It has uncovered a "fundamental problem" in the way it collects the data from producers across the country. In essence, it surveys only large producers and extrapolates its findings across to smaller producers. (Wall St Journal)
In response, UNG has shot higher by almost 11% in two days, and one investor made millions in profits.
What kind of statistics does the government collect? Does this mean that the 3Tcf in storage are not actually measured?
If the price falls so much, well, just change the way the data is reported, so prices can go higher. Since when are prices determined by a survey and not by the actual demand and supply?
This all boggles the mind and stinks, badly.
Please take a look at the UNG chart:
Look at the sharp recent rise, and one wonders who bought all those shares on April 1st! That is one rich "investor". We hope the police will be called.
Anyway, how to profit from this situation: Our favorite straddles. Here they are for April and May:
Computed with StraddlesCalc.
Disclaimer: The author does not hold any UNG, one the worst performing ETFs on the market.