This is a sample entry from Brian Cullen’s email newsletter, The Cullen Outlook.
July / December NATURAL GAS seasonal spread:
As we head into the summer months, we tend to see a rally in Natural Gas as suppliers and traders deal with the unknown of supply and demand issues and trade the front months accordingly (JULY). As June approaches and supply and demand for the summer becomes clearer, these same concerns tend to shift focus more on further out winter months (DECEMBER). This seasonal shift would be supportive for a short front month / long back month spread.
- SELL the JULY contract
- BUY the DECEMBER contract
Premium of -0.77 to the BUY side … last trade 0.77 1/2 points
- Risk will be -0.72 … ($500.00)
- OBJ will be -0.87 … $1,000.00
(we want this spread to WIDEN once filled)
Initial Margin for this spread is roughly $1,080.00
It may not be possible to limit losses to the exact loss limit depending upon market conditions and the possibility of limit moves.
Have a look:
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