Natural Gas back to Widowmaking?

While natural gas over much of past 4 years has been about as fun as watching paint dry – staying mostly in a range between 2.50 and 3.50, it has picked up in activity as of late, shooting up about 17% today behind some cold weather in the Northeast. It was enough to get Josh Brown tweeting:

Now, Natural Gas used to be one of the most volatile markets around, with the market (and particularly the infamous March/April spread) lovingly known as the widowmaker by many in the industry for the sharp price moves it has been known to have, making widows out of many trader’s wives (I guess the metaphor goes…) as they take killer losses due to the out-of-nowhere volatility. This is the very market and trade that caused one of the biggest hedge fund blow ups of all time in Amaranth Advisors, who lost a few billion betting on Natural Gas movements, either ignoring or not knowing days like this one happen:


But since fracking became a thing and all commodity prices took a hit following the 2008 financial crisis, we’ve essentially been on the low side of the historical prices in a range between 2.00 and 6.00, even causing us to wonder if Natural Gas was one of the flight to quality investments a few years ago – along the lines of the Japanese Yen where you think: “it can’t go any lower”.

Well, as often happens in commodities (although not as much as systematic macro and managed futures hedge funds would like these days), periods of high volatility and 17% spikes tend to come out of periods of compressed volatility and a lack of such spikes. It’s like the markets lull you to sleep, before jumping to a new paradigm.  For those on the short side of this trade, we hope your models incorporated some of the historically high volatility of Nat Gas and didn’t have too much risk on. For those on the long side = congrats! We’re seeing a few of the trading programs on our books, including Emil Van Essen  and Resolve Asset Management long Natural Gas and enjoying the move higher. Watch the reverb, fellas!

A host of Nat Gas talk from our archives:

1. Natural Gas Near All Time Lows:

There hasn’t been a lot of talk about the neutering of the market formerly known as the widowmaker. The market that has seemed to miss most people’s radars is Natural Gas, which reached the second lowest close on record.

2. Natural Gas ETFS – Heads you Lose, Tails you Lose More:

It sure is a weird set of circumstances when investors buying the long ETF are down about the same amount since inception as those buying the short ETF. They can’t win for losing.

3. Natural Gas Volatility Explodes…. Again! 

The sneaky colorless, odorless gas has snuck back up over the past few days – and pushed through its past highs today going over $6 , something not seen by investors since 2009

4. Natural Gas Volatility Exploding

The 3 day Average True Range jumped about 200% in the last week

5. “Natural Gas on the Cusp

Back in March, Natural Gas was stuck in a trading range of between $2 and $6 for 5 years.

6. The Oil/Nas Gas Slide Continues

The impressive decline of the spread between Crude Oil and Natural Gas in 2012.

7. Nat Gas: Return of the Widowmaker?

We stack up and compare Nat Gas average daily moves percentages with largest daily move percentages.

8. “Sky High Talk on Low Natural Gas Prices

Someone (who wanted to remain anonymous) with 35 years of experience in the natural gas industry, shares his insights.

9. Natural Gas 2011 Yearly Performance

The yearly performance of Natural Gas Futures along with the other futures contracts back in 2011.

10. The Curious Case of Natural Gas

Would T. Boone Pickens natural gas legislation provide more supply to the industry, and therefore push down prices, or would the markets not follow supply and demand rules?

11. Natural Gas Price Increase a Natural Result?

Would the T. Boone Pickens legislation change the landscape of not only the natural gas industry, but also the Crude Oil industry as well? Look and find out.

12. Is Natural Gas the new Flight to Quality Investment?

We have been noticing Natural Gas rising on big ‘risk off’ days, and saw the same thing yesterday. With everything down except flight to quality plays Yen, Swiss franc, US Bonds, and the USD.

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.