Velocityshares 3X Inverse Natural Gas Etn (DGAZ)

[surehands]

I have never, ever seen a .61 cent spike in NG spot price...I've seen .19/15 etc...

In The later cases I've seen spot price jump significantly then the next trading day NG trade lower and the spot would readjust downward that evening.

On the other hand I've seen a constant elevated spot price start moving front month toward the spot price.

So the answer is it could go both ways...

Remember the spot price is used for pricing of immediate delivery of commodity.

U/D are currently following the Feb Contract(For March 1 Delivery). Note NG does not trade on current temps or temps for following 2 or 5 days. NG is always forward looking at 10 to 30 days out. Thus why the 16 to 20 day ensemble is preferred and so popular with NG traders.

So the question is, did traders properly value NG with last week price appreciation. Or, is there more upside appreciation due to re-valuation?


Maybe one of the posters that trade futures can answer this question.

Jan Futures expired on the Wed Dec 27. However according to my TOS options futures layout. January futures were trading on Friday Dec 29.

Im taking a wild stab in the dark trying to explain this (still researching)
So, if a buyer on Thursday Dec 28th and wanted to buy NG for immediate delivery That buyer would need to use the spot price since January futures are allegedly expired. But we are still in January! All contracts carry a 3 day review process thus putting immediate delivery on Jan 4th...Dont know, thinking out loud here and was wondering if this had anything to with spot price appreciation. Other than the obvious cold weather.



Anyway back to next weeks price action.

Scenario A (most likely gap up) We gap up to 3.02 end day 3.05 At this point Daily is OB. Could be OB all the way to 3.10/3.15.

Scenario B We gap down to 2.86/2.88 if a selling frenzy is created 2.80. Then we bounce into report back to 3.0sh..


Note that the HDD ensembles although GFS are starting to turn red:



Hoping you have a green trade Acrazjo. GLTU

P.S.

DGAZ is a double into March!

Happy New Year to ALL - Be safe out there!