Calendar Spread Natural Gas

The case deals with risk management issues related to a large calendar spread position in a highly seasonal and volatile commodity natural gas.

Calendar spread natural gas. Time spreads also called calendar spreads these trades are where the trader bets for example that the summer will be warmer than usual boosting natural gas prices thus buying summer gas and. Apart from fundamental factors affecting the supply and demand for natural gas the spread is also exposed to transient price movements in the futures market itself. The case deals with risk management issues related to a large calendar spread position in a highly seasonal and volatile commodity natural gas.

Futures spread strategy for september 2020 buy ngn21 ngj21. Unlike vanilla options that give the holder the right to enter a long or short futures position calendar spread options exercise into two separate futures positions. Two examples of natural gas calendar spreads could be a summer winter spread using the averages of the summer and winter months and a march april spread when winter demand slows and moves into the summer injection season.

The natural gas term structure is defined by seasonality. Buy 1 pack spread buy 1 closer maturity pack sell 1 further maturity pack. Apart from fundamental factors affecting the supply and demand for natural gas the spread is also exposed to transient price movements in the futures market itself.

Whereas a natural gas calendar spread option derives its price from the price differential between two natural gas futures contract months. Here we are also placing a calendar spread but we are also looking to take advantage of the seasonality that accompanies the natural gas market. You can also browse other free futures spread trading strategies we publish a free trading strategy each month.

Free strategy is provided for illustrative purposes only and should not be construed as investment advice or trading strategy. One trade that has been very popular recently is the calendar spreads that we discussed in oil cl. The pack spread consists of 4 contracts with the same instrument group and consecutive quarterly maturity months m8 u9 z9 h9 with each leg 1 1 1 1 ratio ps pack spread.

Please read our disclaimer. Futures spread strategy for october 2021 buy natural gas july 21 sell natural gas june 21. Calendar spread options or csos are options on the spread between two futures contract months rather than a single underlying contract month.