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  • Natural Gas ETF: The Short-Term Story [View article]
    Shorting UNG while replicating it via futures seems to be a "sure thing" and it will be. But every time there is a "sure thing" in this market (or any market) you have to be extra careful. Just like shorting GM, FNM, FRE, AIG and many other worthless stocks. Market can stay irrational longer than most of us can pay "hard to borrow" fees and/or meet margin calls. So if you are trading against UNG premium, you are doing the right thing, you just have to be careful and not discount markets ability to stay irrational longer than anyone would expect.
    The fact that UNG is hard to borrow isn't good for (short term) shorts. It means a short squeeze is much more likely.
    It IS good for the long term shorts, because the best opportunity to double down on your short is during a short squeeze. I'm not short UNG yet, but if there is a short squeeze and premium goes to say 30% I think I'll just have to be.

    On Sep 03 09:22 PM Mook wrote:

    > I have to say it borders on comical listening to all the back and
    > forth on this topic from people who don't trade natural gas physical
    > or futures.
    >
    > So just a few tidbits for you:
    > 1)Today cash (aka spot) natural gas traded round 65 cents below the
    > Ocotober futures. Indications for tomorrows trading for the weekend
    > are much worse with cash indicated to be around $1.80.
    >
    > 2)There are several "unexpected" cargos of LNG showing up this month
    > just when we don't need them.
    >
    > 3)The likely case is the futures contracts will trade down to cash
    > versus cash up to futures over the next 1-2 months. Meaning this
    > is going to get really UGLY.
    >
    > and drum roll for the biggie....
    >
    > 4)I'm short UNG through fidelity. They called today to inform me
    > they were raising the carrying cost on the shares because they had
    > become EXTREMELY had to find to short. I was paying a 2%/yr of NAV
    > per year for the borrowed short shares. Today they raised it to
    > 10%!!!!!!!!!!!! Think about it. They want me out so the smart money
    > (ie institutional customers) can short more shares.
    >
    > Enjoy.!
    Sep 06 13:43 pm |Rating: 0 0
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