Natural Gas, High Probability Seasonality Trade (UNG, BOIL)

Research & Analysis
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I hate writing long articles so I’ll keep it short and sweet. Natural gas tends to fade into mid year then rise soon after July as countries stockpile for winter months.

The past year has been an exceptional year for NG due to Ukraine war and EU sourcing non-Russian NG. However warmer than expected winter into a supply glut have axed the price abruptly with Freeport LNG also delaying re-opening to Feb onwards.

My plan is to start loading long on NG around July/August. If NG goes to low 2s before that I will start loading too. NG dipping below 2 is very rare and last time happened during covid:

Now the tickers to trade are

UNG: 1x
BOIL: 2x
KOLD: 2x inverse

I’d suggest using UNG non-leveraged since if the price of NG stagnates or goes against you the slippage on BOIL can be annoying. Shorting KOLD is also a good option because vol decay and slippage will eventually put you into the $ as NG goes up.

If you do trade BOIL then trade into momentum and set a stop loss, I highly discourage blindly DCA’ing into it.

Alright, good luck!

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Thanks for sharing.

Given that last year was an anomaly in the seasonality of NG’s pricing. What are your thoughts on shorting Natural Gas until that re-accumulation phase that you mentioned near the end of July?

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If NG spikes above 5 I’d look for a short, otherwise I wouldn’t feel comfortable shorting below that. EU stocking up this year may cause prices to jump ahead by May this time around.

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This may throw a spanner in the works so I am slowly DCA’ing into a KOLD short now, factoring in 2-3x upside worst case but it shouldn’t get to that.

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