For the past 3-4 weeks I have been discussing the fact that natural gas recently pushed below a ten year low. Natural gas obviously is used in the heating and cooling industry as well as fuel for diesel trucks. We recently pushed to 2.20 for Feb. futures and 2.42 for April futures. This week saw a mini revival as futures advanced 50 cents in 2 ½ session with April gas pushing to 2.94 this morning. We have slid back to 2.70 or about ½ of the rise. This 2.70 level looks to hold. As I have mentioned previously, I wish to start an ongoing process of holding a position for natural gas. Conventional wisdom and the industry standard is that natural gas should be trading to about 1 /10 of crude oil. With crude at $100 this logic would mean natural gas should be trading near $10.00 and not the current 2.70. The April call options expire on March 27.
The Trade: Buy April 340 natural gas call at 36 cents or $360 and hold. Objective: I look for at least 3.75 during the next two months. From 340 to 375 = $3500 at $100 per cent
Daily Natural Gas April
Monthly Natural gas