United States Natural Gas Fund (UNG): Options Gone Wild

nyse:ungTraders are having a field day with the United States Natural Gas Fund, LP (NYSE:UNG) options, both calls and puts, the race to place on bet on Natural Gas is on and its worth millions.  At 2 PM EST, 48 million UNG shares have traded hands, that's more than double the normal volume.  The June 09, July 09, and Oct 09 UNG options are all buzzing today but the Oct 09 $14 Puts has a staggering open interest of 155,954 that truly takes the cake.

Yesterday the Masters talked up Spidey-Sense and the UNG.  Even as oil prices fell today, natural gas prices surged more than 8% - can you say speculation.

Other than the fact that natural gas prices had fallen so far, there seemed little reason to buy it. The latest index of manufacturing in New York indicated that demand weakened yet again. Manufacturers, major users of natural gas, have slashed thousands of jobs. 

Spiking natural gas prices would be a concern for everyone, from the heavy industries that use it to power factories to consumers who use it to heat their homes.  Yet traders with Spider-Sense are betting natural gas prices are headed up yet hedging their bets by buying calls and puts. Why not enjoy the volatility of the UNG and cash in while shares bounce all over the place in the next few weeks and months?  Expect more money to rush into this fund, its on like Donkey Kong.

The activity speaks for itself on the UNG options today (6/16/09), this has no doubt been the trade of the week:

Options Expiring Fri, Jun 19, 2009  
 
Calls Strike
Price
Puts
Symbol Last Change Bid Ask Volume Open Int Symbol Last Change Bid Ask Volume Open Int
UNYFJ.X 5.35 Down 0.35 5.20 5.50 17 780 10.00 UNYRJ.X 0.02 0.00 N/A 0.05 5 312
UNYFK.X 5.10 Up 0.40 4.30 4.50 1 3,010 11.00 UNYRK.X 0.01 0.00 N/A 0.05 14 1,540
UNYFL.X 3.30 Down 0.40 3.20 3.40 71 3,022 12.00 UNYRL.X 0.02 Down 0.01 N/A 0.05 3 9,635
UNYFM.X 2.40 Down 0.30 2.30 2.40 438 4,385 13.00 UNYRM.X 0.05 0.00 N/A 0.05 136 27,663
UNYFN.X 1.40 Down 0.45 1.35 1.45 2,100 23,245 14.00 UNYRN.X 0.05 0.00 N/A 0.10 10,031 40,296
UNEFO.X 0.65 Down 0.25 0.60 0.65 4,469 29,934 15.00 UNERO.X 0.25 0.00 0.25 0.30 5,701 21,225
UNEFP.X 0.23 Down 0.12 0.20 0.25 2,881 28,906 16.00 UNERP.X 0.85 Up 0.25 0.80 0.90 1,856 7,871
UNEFQ.X 0.07 Down 0.08 0.05 0.10 1,828 17,139 17.00 UNERQ.X 1.65 Up 0.15 1.65 1.75 374 2,771
UNEFR.X 0.05 0.00 N/A 0.05 1,022 4,975 18.00 UNERR.X 2.00 Down 0.30 2.65 2.75 20 719
UNEFS.X 0.05 0.00 N/A 0.05 6 5,852 19.00 UNERS.X 4.82 0.00 3.60 3.70 55 889

 

Options Expiring Fri, Jul 17, 2009  
 
Calls Strike
Price
Puts
Symbol Last Change Bid Ask Volume Open Int Symbol Last Change Bid Ask Volume Open Int
UNYGI.X 6.60 0.00 6.20 6.50 10 253 9.00 UNYSI.X 0.03 0.00 N/A 0.05 10 745
UNYGJ.X 5.40 Down 0.40 5.30 5.50 142 3,226 10.00 UNYSJ.X 0.02 0.00 N/A 0.05 50 2,213
UNYGK.X 4.40 Down 0.40 4.40 4.50 40 492 11.00 UNYSK.X 0.10 0.00 0.05 0.10 4 5,624
UNYGL.X 3.57 Down 0.33 3.50 3.60 152 2,197 12.00 UNYSL.X 0.17 Up 0.02 0.15 0.20 1,282 30,810
UNYGM.X 2.75 Down 0.31 2.70 2.80 360 3,122 13.00 UNYSM.X 0.38 Up 0.03 0.35 0.40 2,938 59,807
UNYGN.X 2.00 Down 0.38 2.00 2.10 1,383 14,200 14.00 UNYSN.X 0.70 Up 0.10 0.65 0.70 1,731 33,083
UNEGO.X 1.40 Down 0.30 1.40 1.50 8,253 47,315 15.00 UNESO.X 1.10 Up 0.10 1.05 1.15 2,432 16,848
UNEGP.X 1.00 Down 0.20 1.00 1.10 6,248 39,340 16.00 UNESP.X 1.65 Up 0.15 1.60 1.75 1,043 6,242
UNEGQ.X 0.73 Down 0.17 0.70 0.75 7,871 41,794 17.00 UNESQ.X 2.40 Up 0.25 2.30 2.40 366 4,316
UNEGR.X 0.50 Down 0.08 0.45 0.55 2,822 14,731 18.00 UNESR.X 3.10 Up 0.09 3.00 3.20 43 1,562
UNEGS.X 0.37 Down 0.08 0.30 0.40 1,084 4,752 19.00 UNESS.X 3.50 Down 0.40 3.90 4.10 12 730
UNEGT.X 0.30 Up 0.05 0.20 0.30 350 7,974 20.00 UNEST.X 4.50 Down 0.40 4.80 5.00 4 674
UNEGU.X 0.17 Down 0.03 0.15 0.20 182 4,132 21.00 UNESU.X 6.90 0.00 5.70 5.90 31 221
UNEGV.X 0.10 0.00 0.05 0.15 155 1,788 22.00 UNESV.X 6.20 Down 1.10 6.60 6.90 7 301
UNEGW.X 0.07 Down 0.03 0.05 0.10 615 1,177 23.00 UNESW.X 6.90 Down 0.90 7.60 7.80 5 184

Options Expiring Fri, Oct 16, 2009  
 
Calls Strike
Price
Puts
Symbol Last Change Bid Ask Volume Open Int Symbol Last Change Bid Ask Volume Open Int
UNYJE.X 10.80 Up 0.50 10.20 10.50 2 37 5.00 UNYVE.X 0.05 0.00 N/A 0.05 2 51
UNYJF.X 10.10 Up 0.80 9.30 9.50 21 45 6.00 UNYVF.X 0.05 0.00 N/A 0.10 10 10
UNYJG.X 8.50 0.00 8.30 8.60 7 140 7.00 UNYVG.X 0.15 0.00 N/A 0.10 5 9
UNYJH.X 7.80 0.00 7.40 7.60 4 183 8.00 UNYVH.X 0.20 0.00 0.10 0.20 1 621
UNYJI.X 6.90 Up 0.80 6.50 6.70 30 825 9.00 UNYVI.X 0.20 0.00 0.20 0.30 80 1,167
UNYJJ.X 5.70 Down 0.40 5.70 5.90 50 2,636 10.00 UNYVJ.X 0.42 Down 0.02 0.40 0.45 150 6,984
UNYJK.X 5.10 Down 0.20 4.90 5.10 14 2,193 11.00 UNYVK.X 0.60 0.00 0.60 0.65 768 11,728
UNYJL.X 4.30 Down 0.30 4.20 4.40 72 2,261 12.00 UNYVL.X 0.90 0.00 0.85 0.95 1,604 23,855
UNYJM.X 3.70 Down 0.10 3.60 3.80 120 6,461 13.00 UNYVM.X 1.25 0.00 1.25 1.35 1,327 54,253
UNYJN.X 3.10 Down 0.30 3.00 3.20 3,062 31,727 14.00 UNYVN.X 1.75 Up 0.15 1.65 1.75 2,419 155,954
UNEJO.X 2.58 Down 0.22 2.55 2.65 2,187 33,066 15.00 UNEVO.X 2.20 Up 0.15 2.15 2.25 1,243 8,453
UNEJP.X 2.20 Down 0.20 2.15 2.25 822 27,521 16.00 UNEVP.X 2.75 Up 0.15 2.75 2.85 1,937 3,423
UNEJQ.X 1.84 Down 0.11 1.80 1.90 12,025 13,989 17.00 UNEVQ.X 3.30 0.00 3.30 3.50 282 1,505
UNEJR.X 1.50 Down 0.05 1.45 1.60 16,691 13,455 18.00 UNEVR.X 4.10 Up 0.10 4.00 4.20 351 1,594
UNEJS.X 1.20 Down 0.20 1.20 1.30 181 3,976 19.00 UNEVS.X 4.80 0.00 4.80 4.90 214 736
UNEJT.X 1.05 Down 0.05 1.00 1.10 2,251 63,326 20.00 UNEVT.X 5.40 0.00 5.60 5.70 56 1,011

More on the UNG:
United States Natural Gas Fund, LP (USNG) is a limited partnership. The Company is a commodity pool that issues units that may be purchased and sold on the NYSE Arca, Inc. The investment objective of USNG is for the changes in percentage terms of its net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas as traded on the New York Mercantile Exchange (the NYMEX) that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire. USNG invests in futures contracts for natural gas, crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other United States and foreign exchanges. The Company’s general partner is United States Commodity Funds LLC.

United States Natural Gas (UNG) has seen its assets balloon from $670 million in February to $3.7 billion. But the fund may have gotten too popular, says Ian Salisbury for The Wall Street Journal. Funds that hold commodities generally have limits on the number of shares they can issue to meet demand, and UNG may be approaching the limit.

A filing with the Securities and Exchange Commission (SEC) shows that managers want to increase the available shares almost tenfold, but those requests often take weeks. What happens in the meantime? The shares could trade at prices higher than the underlying value of its holdings.

It gives the SEC a dilemma: if it doesn’t move quickly, it could risk harming the fund’s shareholders; but rushing could push other ETF firms that have business before the SEC to the back of the line.

ETFs typically create new fund shares whenever investors demand them, but commodity funds are a different breed with a unique structure.

Despite rising natural gas prices in recent days, the cost is still low at $4 per million BTU compared to last July, when they were $13. What’s going on?

Supplies are abundant right now, and low prices could cause a shift within the electrical power industry. The onset of lower natural gas prices is bad for the coal industry, in that it has long been a source of fuel for the electric-power industry, reports Rebecca Smith and Ben Casselman for The Wall Street Journal.

The demand for electrical power is lower at this time, which could cause power companies to invest billions in natural gas companies, rather than coal. This would cause a shift within the industry that is over 100 years old, as coal is one of he biggest producers of electrical power.

The trend also developed in the 1990’s, with the power industry interested in natural gas, as states deregulated their electricity markets, a new breed of so-called merchant generators built scores of gas-fired plants, encouraged by rosy supply forecasts and easy borrowing.

New natural gas discoveries have been found in Texas, Louisiana, and Pennsylvania which also supports the case for natural gas as a strong power source.

United States Natural Gas (UNG): down 32.2% year-to-date

SOURCE: http://www.nasdaq.com/newscontent/20090616/as-investors-bet-on-rising-na...