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This week has brought some tumultuous conditions in a variety of ways.  The stock indices have dropped to their lowest level in over a month.  Unseasonably cold temperatures have gripped most of the US.  This has caused much volatility in the energy complex.  Among the energy markets, none have seen as much movement as Natural Gas (NGH14).

This morning Bloomberg had a good article explaining some of the fundamental factors behind the bullish volatility seen in Natural Gas futures:

“Trading volume was more than double the 100-day average. The February contract surged 52.4 cents as it expired yesterday, reaching $5.557, the highest settlement since Jan. 25, 2010.

Prices are up 23 percent this month, heading for the biggest gain since September 2009.”

Below are charts of Natural Gas prices in the last six months as well as from 2000 to 2014 for a long-term reference:

Chart Courtesy of OEC Trader by Open E Cry

Chart Courtesy of OEC Trader by Open E Cry


Chart Courtesy of TradingEconomics.com

Chart Courtesy of TradingEconomics.com

As you can see, $5.000/mmBtu is not unprecedented for Natural Gas.  Indeed, volatility in the previous decade was much more.  As with all trading, however, it comes down to risks and expectations.  For the trader, a number of questions may arise:

  • Am I positioned to handle this kind of volatility?
  • How would this affect margin rates?
  • Would options be a better vehicle for risk management than outright futures?
  • What managed futures programs have profited from these moves?

Having these conversations with your Broker can help your understanding and positioning in an increasingly complex trading environment.  Call today and discuss the risk and reward with your broker!

The Foremost Trading Team

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Disclaimer: Trading futures, options on futures, retail off-exchange foreign currency transactions (“Forex”), investing in managed futures and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. This website contains information obtained from sources believed to be reliable, but such information has not been independently verified and its accuracy is not guaranteed by Foremost Trading. Past performance is not necessarily indicative of future results. Any mention of performance in any context whether actual or hypothetical is no guarantee of future results. Foremost Trading became a registered ‘dba’ of RCM Alternatives in July of 2020. Please see full disclaimer here: https://www.rcmalternatives.com/disclaimer/