Buy Alert: June 18, 2013

| June 18, 2013

Buy Alert:  June 18, 2013


Option Strategy:

Buy US Natural Gas Fund (UNG) August 2013 $21.00 calls for $1.05 or better.


Commodity Outlook:

Natural gas is presenting us with a great bullish trading opportunity right now.  Not only is the commodity near an important technical support level, but we’re also entering the hottest part of the year here in the US.

And you know what that means…

Electricity demand is set to surge over the next three months as temperatures rise and consumers crank up their air conditioning units. 

What’s more, last week’s EIA natural gas inventory addition data was in-line with expectations at 95 bcf.  However, total US inventories are still 58 bcf below the five-year average of 2,405 bcf.

If this week’s EIA inventory data comes in weaker or in-line with expectations, we’ll likely see natural gas trade over $4 mmBtu in coming weeks. 

As you may know, US Natural Gas Fund (UNG) is a great way to capitalize on higher gas prices.  UNG is an ETF that tracks daily price movements in natural gas futures. If natural gas rallies, 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: August 16th, 2013
Strike Price: $21.00
Current Bid/Ask Price: $0.89/$0.91
Maximum Buy Up To Price: $1.05
Maximum Risk Per Contract: $105

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

Natural Gas


Exit Strategy:

Remember, we want the price of natural gas to move higher.  Our first profit target is $4.10.  If upward momentum builds in coming weeks, we may see natural gas retest the high set in April at $4.40.

Technical support is at $3.50.  If natural gas trades below this level, conservative investors should consider closing this trade to keep risk in check.


Category: Commodity Trading