The February natural gas made a sharp rise from 320 to 410 during September/October. We have seen a pullback to below 370 and support is strong at the 50 % level near 365. I don’t want to buy a future or do an option strangle as the upside may be ample depending on the coming winter and the steady pick up in demand. I am suggesting to sell/write the February 320 puts. There is 50 days until expiration and it would bring in $400 each at a small margin of $600. The delta is reasonable at .138

 

The Trade:   Write/Sell the February 320 Natural gas put for 40 points= $400
Protection:  Exit the trade if futures break below 320
Objective:     Option expires worthless if futures above 320 at expiration, Keep $400 premium.

 

Thanks,

Bill Frejlich
The PRICE Futures Group
Author of The Windy City Trader

 

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