Buy Alert: April 30, 2015

| April 30, 2015

Buy Alert: April 30, 2015

 

Option Strategies:

Buy US Natural Gas Fund $UNG July 17, 2015 $14.00 calls for $0.90 or better.

Buy Southwestern Energy $SWN June 19, 2015 $28.00 calls for $1.30 or better.

 

Commodity Outlook: Natural Gas

Thankfully we held off on any bullish precious metals trades yesterday!  Despite a fairly dovish tone from the Fed, gold and silver bulls are nowhere to be found this morning.

However, there’s one commodity that’s catching my eye right now…

Natural gas.

As you may know, it has been a rough year for the commodity.  It’s down 46% from this time last year and 7% lower year-to-date.  All that selling has it trading near 3-year lows at $2.70 mmBtu.

Now check this out…

Each time natural gas has dropped to $2.50 or lower in the past six years, it has rallied by 50%-100% within the following six months.

What’s more, this morning’s EIA natural gas report came in weaker than expected.  Inventories grew by 81 billion cubic feet (bcf) instead of the 90 bcf expected by analysts.

The news has natural gas popping 4% higher as I write.

Folks, now’s the perfect time to place a few carefully selected call trades that will benefit from rising natural gas prices over the next few months!

 

Resource Trade #1: US Natural Gas Fund $UNG

As you may know, $UNG is a great way to capitalize off natural gas price fluctuations.  The ETF trades in lockstep with the price of natural gas.

Since there’s a very strong likelihood of the commodity rising substantially from these deeply oversold levels, now’s the perfect time to establish a call trade in UNG.

Here’s what we’ll do…

Buy the $UNG July 17, 2015 $14.00 calls for $0.90 or better.

The current bid/ask spread for this contract is $0.72/$0.81.

Do not pay more than $0.90!

Our official entry price for performance tracking is $0.81.  Your price may be higher or lower.

Exit Strategy:

US Natural Gas Fund

Remember, we want $UNG to trade higher.  Our first profit target is $15.00 while our second target is at $16.50.

Our risk control line for this trade is at $11.90.  If $UNG trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Resource Trade #2: Southwestern Energy $SWN

Here’s another great way to play a rising natural gas price.  $SWN is one of the largest natural gas producers in the US.  It has operations in various low-cost US shale basins, making the company a low lifting cost leader.

Should natural gas rally like I believe it will, $SWN will likely follow.

So here’s what we’ll do…

Buy the $SWN June 19, 2015 $28.00 calls for $1.30 or better.

The current bid/ask spread for this contract is $1.16/$1.21.

Do not pay more than $1.30!

Our official entry price for performance tracking is $1.21.  Your price may be higher or lower.

Exit Strategy:

Southwestern Energy

Remember, we want $SWN to trade higher.  Our first profit target is $30.00 while our second target is at $32.00.

Our risk control line for this trade is at $25.75.  If $SWN trades below that level, conservative investors should consider closing this trade to preserve capital.

 

Category: Commodity Trading