Natural Gas Volatility Exploding

We explained in our “Managed Futures 2014 Outlook” a few weeks ago that volatility has been contracting for quite a while (much to the chagrin of trend followers and other long volatility type traders), increasing the chance that this compressed spring would ‘uncoil’ at some point in the not too distant future.  Well, not too long after – everyone’s favorite energy as of late, Natural Gas, has done just that sort of volatility uncoiling, with the 3 day Average True Range jumping about 200% in the last week!

Natural Gas Dollar Range(Disclaimer: Past performance is not necessarily indicative of future results)

That’s swings of about $5,600 per contract on average the past few days, levels not seen since back in the volatility hay day of 2008/2009. This was enough for the CME to hike Nat Gas margins, Amaranth investors to have some nasty flashbacks, and for us to roll out a bevy of links on Natural Gas last week.The buzz about Natural Gas has spread past a couple articles in major media outlets… President Obama not only mentioned the commodity it in his State of the Union, but made some interesting claims.

“We produce more natural gas than ever before — and nearly everyone’s energy bill is lower because of it.”

According the the EIA, America is producing more Natural Gas than ever before, especially given the recent rise in fracking. If this price move and resulting volatility is just the result of the Polar Vortex, it may be short lived… it will get warmer, right? Please tell us it will, Chiberia is starting to get a little ridiculous (3 straight days of below zero windchill).  Or it may be just the beginning of a sustained up trend in Natural Gas prices, a classic uncoiling of the compressed volatility a few years in the making, and Obama’s statement of lower bills could be moot.

For now, we’ll keep cheering it higher for the benefit of commodity trading advisors like CovenantQuantum LeapBrandywine Symphony,  Quest Alpha, and Sona Trading that are currently holding long positions! There sure seems to be a lot of room to the upside if it can break above the $6.00 mark.  Just watch out for that volatility…

Write a Comment

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.