July 20th, 2018 Newsletter

Natural Gas Spread Review and Learn to Accept a Losing Day

July 20th, 2018 - Issue #928

In This Issue

1. Trading 101: One of the Most Important and overlooked Aspects of (Day) Trading
2. Hot Market Report: Natural Gas Spread Review
3. Economic Calendar

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1. Trading 101: One of the Most Important ( and often overlooked....) Aspects of Day Trading - Learn to Accept Losses

by: Ilan Levy-Mayer, VP

I am frequently asked, (and many times I ask myself) about the keys to trading success in general and futures trading in specific. The list is long and, to be honest, it is not an exact science

Successful trading is a mix of art and math, personality and discipline and much more in between. I have seen many different ways to make money in the futures and commodities world. I saw and still see clients trade and make money.

Yet, the list of clients who lose money is bigger than the ones who make moeny....Why?

accept a losing day

One of the most frequent and overlooked problems is not “how to make money”, but one key is actually “learning how to lose”… .If you have never traded before you may raise an eyebrow…If you have indeed traded before, you’re starting to smell where I am going with this….

In this week's article I wil touch on the topic as well as try to provide you, the trader, with some practical tips to help you learn how to lose properly in order to give you the chances to win more consistently.

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2. Hot Market Report: Natural gas Spread Review

Source: Moore Research Center, Inc.

Click on image below to enlarge

Natural Gas Futures Spread;

Summer Energies

The cooling season is also upon us, when air conditioners run full tilt. How does it affect natural gas?
Consider natural gas. The heating season runs November-March. In April, the industry begins replenishing stocks depleted during winter by accumulating inventories during the so-called injection season (injecting gas into salt caverns for storage). That process accelerates during summer, even in the face of summer usage (when large regions of the country depend on gas to generate electricity to run air conditioners). As it does and those inventories grow, the futures market builds discounts into its price structure for months during which stocks will be heaviest. In fact, Moore Research has found that the October Natural Gas futures contract has closed lower on about September 7 than on about July 14 in 14 of the last 15 years --- the last 12 consecutively.
In contrast, it also awards premiums to months when stocks will be lowest and in need of rebuilding. For example, the Long April/Short October Natural Gas spread has closed more favorably toward April on about September 7 than on about July 22 also in 14 of the last 15 years --- and also the last 12 consecutively, albeit suffering a few large drawdowns. (Each increment of $0.001/mmBtu is worth $10.00.)
So far this year the spread has traded between its narrowest discount of -$0.019/mmBtu back in December and its widest at a double bottom --- the first in May at -0.310 and then slightly higher in June at -0.308. Since then, the spread has narrowed sharply, closing at a discount this past week of -0.131.
That may seem a dramatic move, but a look at the longer-term charts suggests otherwise. In fact, the monthly chart shows that, with the single exception of the year 2000, these spreads have since 1992 always traded at a premium at some time during the twelve months prior to expiration --- including the all-time high in 2006 of +2.888.
And the daily chart shows that this dynamic move off the double bottom easily blew through the downtrend line drawn through earlier highs from December. Does that open up the possibility of at least a test of even money --- if not a premium?
Please remember: These are NOT trading recommendations. They are intended only as potential ideas based on the market's own performance in the past, but past performance is not necessarily indicative of future results. Futures trading involves substantial risk of loss.

Seasonal tendencies are a composite of some of the more consistent commodities futures seasonals that have occurred over the past 15 years. There are usually underlying fundamental circumstances that occur annually that tend to cause the futures markets to react in a similar directional manner during a certain calendar period of the year. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account h as in the past or will in the future achieve profits utilizing these strategies. No representation is being made that that price patterns will recur in the future. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. Results not adjusted for commission and slippage


Our brokers here at Cannon will be happy to chat about the Natural Gas market, other energies, other futures, options, futures spreads and much more! Feel free to contact us at any time.

Good Trading,

3. Economic Calendar

Source: Moore Research Center, Inc.

Date Reports Expiration & Notice Dates
07/19
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Philadelphia Fed(Jul)
9:00 AM CDT - Leading Indicators(Jun)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply
LT: Jul Coffee(ICE)
 
 
 
07/20
Fri
2:00 PM CDT - Catfish Production
2:00 PM CDT - Cattle
2:00 PM CDT - Cattle On Feed
2:00 PM CDT - Milk Production
LT: Aug Crude Lt(NYM)
Jul Nikkei Options(CME)
Jul Russell Options(CME)
Aug Orange Juice Options(ICE)
07/23
Mon
9:00 AM CDT - Existing Home Sales(Jun)
2:00 PM CDT - Cold Storage
 
 

 
 
 
07/24
Tue
8:00 AM CDT - FHFA Housing Price Index(May)
3:30 PM CDT - API Energy Stocks
 
 
FN: Aug Crude Lt(NYM)
 
 
 
07/25
Wed
6:00 AM CDT - MBA Mortgage Index
9:00 AM CDT - New Home Sales(Jun)
9:30 AM CDT - EIA Petroleum Status Report
2:00 PM CDT - Dairy Products Sales

 
 
 
07/26
Thu
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Adv International Trade In Goods(Jun)
7:30 AM CDT - Durable Goods Ex-Transportation(Jun)
7:30 AM CDT - Durable Orders(Jun)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply
LT: Aug Copper Options(CMX)
Aug Gold Options(CMX)
Aug Silver Options(CMX)
Aug Natural Gas Options(NYM)
Aug RBOB & ULSD Options(NYM)
07/27
Fri
7:30 AM CDT - GDP-Adv(Q2)
7:30 AM CDT - GDP Deflator(Q2)
9:00 AM CDT - Michigan Sentiment-Final(Jul)
 
LT: Jul Copper(CMX)
Jul Gold & Silver(CMX)
Jul Platinum & Palladium(NYM)
Aug Natural Gas(NYM)
Aug 2,5,10 Year Notes Options(CBT)
Aug Bonds Options(CBT)
Aug Canola Options(CBT)
Aug Wheat Options(CBT)
Aug Corn Options(CBT)
Aug Oats Options(CBT)
Aug Rough Rice Options(CBT)
Aug Soybeans,Soymeal,Soyoil Options(CBT)
07/30
Mon
9:00 AM CDT - Pending Home Sales(Jun)
 
 
 
FN: Aug Natural Gas(NYM)
 
 
 
07/31
Tue
7:30 AM CDT - Employment Cost Index(Q2)
7:30 AM CDT - PCE Prices & Core(Jun)
7:30 AM CDT - Personal Income & Spending(Jun)
9:00 AM CDT - Consumer Confidence(Jul)
3:30 PM CDT - API Energy Stocks
FN: Aug Copper(CMX)
Aug Gold & Silver(CMX)
Aug Platinum & Palladium(NYM)
Aug Soybeans,Soymeal,Soyoil(CBT)
LT: Jul Butter(CME)
Jul Milk(CME)
Jul Fed Funds(CME)
Aug RBOB & ULSD(NYM)
Jul Butter Options(CME)
Jul Milk Options(CME)
Jul Fed Funds Options(CME)
Aug Lumber Options(CME)
08/01
Wed
6:00 AM CDT - MBA Mortgage Purchase Index
7:15 AM CDT - ADP Employment Change(Jul)
9:00 AM CDT - Construction Spending(Jun)
9:00 AM CDT - ISM Index(Jul)
9:30 AM CDT - EIA Petroleum Status Report
1:00 PM CDT - Auto & Truck Sales
1:00 PM CDT - FOMC Rate Decision(Aug)
2:00 PM CDT - Dairy Products Sales
2:00 PM CDT - Fats & Oils
2:00 PM CDT - Grain Crushings

 
 
 
FN=First Notice, OE=Option Expiration, LT=Last Trade

Disclaimer: This calendar is compiled from sources believed to be reliable. Moore Research Center, Inc. assumes no responsibility for any errors or omissions. It is meant as an alert to events that may affect trading strategies and is not necessarily complete. The release dates for certain economic reports may have been rescheduled.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!

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