Buy Alert: December 19, 2013

| December 19, 2013

Buy Alert:  December 19, 2013


Option Strategy:

Buy US Natural Gas Fund (UNG) January 2014 $22 calls for $0.85 or better.


Commodity Outlook: Natural Gas

I have to be brief this morning…

This morning’s EIA natural gas inventory report came in with a withdrawal of 285 bcf… an enormous number.

In fact, it’s the one of the largest weekly storage withdrawals on record!

And since we’re just in the first inning of the winter heating season, it’s a very bullish report for natural gas.

Natural gas is toying with the $4.40 resistance area as I write.  The commodity will likely break above this important level soon.  What’s more, the most recent NOAA 6-10 day outlook is calling for below normal temperatures for the Northeastern US.

That means withdrawals should continue at a rapid pace, and the price of natural gas will likely push higher.

To capitalize on a continuing rally, let’s buy calls in the US Natural Gas Fund (UNG).  If natural gas continues higher, so will UNG.

Here are the important details you’ll need for this trade…


Trade Metrics:

Underlying ETF Symbol: UNG
Call or Put: CALL
Expiration Month, Day, Year: January 17, 2014
Strike Price: $22.00
Current Bid/Ask Price: $0.71/$0.72
Maximum Buy Up To Price: $0.85
Maximum Risk Per Contract: $85.00


Here’s a breakdown of the important technical support and resistance zones in natural gas…

Natural Gas


Exit Strategy:

Remember, we want natural gas to trade higher.  Our first profit target is $4.60 mmBtu (off the chart).  If colder than normal temperatures continue through the first of the year we’ll likely see a run to $4.80.  

The risk control price is $4.10.  If gas trades below that level, conservative investors should consider closing this trade to reduce risk.

Until next time,

Justin Bennett

Category: Commodity Trading