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UNG - option strategy for August

|Includes:NG, The United States Natural Gas ETF, LP (UNG)

By Danny Devito @


Friday there was the expiration of JULY options.

Today new strategies selling or buying options to cover the period till 20 august next expiration.

Personally, even if I'm bullish on Gas, I prefered to be prudent because the indexes are still to much high and we could have a correction in the next 2/3 months.

However, the Crude Oil and USO was able to rally even with new low of markets, so this shouldn't be a good reason to have so much fear about UNG and gas.

I had an average price of my UNG shares around 13.80 and I sold at 13.30 today the one I had not covered anymore by call selling.

I was already short of some 12 put august and so I increased today the selling of PUT 12.00 but at the same time I bought the put 11.00 and 9.00 (still executing and in bid, while 11.00 was already excuted right now at 0.208 average) that are the support I could expect on the market.

I'm just not covered if the price in august will close between 11.50 (12 - 0.50 premium)  and 11.00 where I have the put at protection.

I can risk so something around 4,25% with a levarage of 1:1 of my capitals.

It's a risk.. but if we consider that I was doing bets since the area 15.00 and at 12.90 level I'm not in loss, this means that options help on commodities ETFs effected by contango losses.

At this moment so I'm relaxed and I will think to what to do, in particular:

1. if I loss the rally and UNG go to 14.50 and above, I could still be in time to sell new puts and make some % profits in august. It's hard scenario and I could earn few if market rally

2. the market crash at 11.05 support area. At that point I can sell my put options 11.00 and make a profit with the option price that will be the double or triple at least and wait if I've fear of further correction to arrive in 9.20 area, or at any time I can just buy the stocks of UNG covered from my put and make trading risk free.
In this scenario however, if I sell my put or buy shares I will be exposed again to with my capitals and long with a big position.
But, we are at 11.05 level! we can expect a great rebound from there.

And imagina so from 9.17.

However, I don't think we should be so pessimistic and there is a good chance that UNG will touch at least the target in area 14.53 of the previous posts mentioned.

Today the support in area 12.69 is still supporting the market, only below that level we can see an attack to the low of 11.91 and there... better to close the eyes (:-)))

Tonight we will comment the close and the UNG/USO spread.

See you next post.


Stocks: UNG, NG