See Jay’s recent post: One More Plunge for Crude Oil?
OK, my last article (Will Natural Gas Break Wind in June?) did sound a little apocalyptic regarding the prospects for natural gas in June. But maybe that did not present the full picture. While that previous article did detail a bearish seasonal period for natural gas starting at the close of trading on June Trading Day #11, very often there is a brief “pop” prior to things taking a turn for the worse.
The Brief Respite
The brief favorable period we will look at now:
*Starts at the end of June Trading Day #8 and;
*Lasts for 3 trading days before things flip to “unfavorable”.
Figure 1 displays the results generated by holding a long position in natural gas futures during this 3-day period since the inception of trading in 1990.Figure 1 – Long Natural Gas futures June Trading Days #9, 10 and 11
For the record:
*There have been 17 up years and 8 down. 5 of the first 6 years showed a loss. Since then 16 out of 19 years and 10 out of the last 11 have seen a gain registered during this three day trading period.
*The average gain was $2,914
*The average loss was -$1,413
*The largest gain was over $10,000 (2006)
*The largest loss was over -$5,000 (2003)
*13 of the 25 years witnessed a 3-day gain of at least $1,800.
So clearly not for the “faint of heart” nor the “small of trading account.”
Figure 2 displays the year-by-year results
Figure 2 – Year-by-Year Results long natural gas futures during “favorable” June period
Combining Bullish and Bearish June Periods for Natural Gas
Now let’s assume a trader held a:
*Long position in natural gas futurse during June Trading Days 9, 10 and 11
*Short position in natural gas futures from the close of June Trading Day #11 through the close of the 14th trading day of July
The year-by-year results appear in Figure 4.
Figure 4 – Yearly results for Long and Short periods for Natural Gas combined
For the record:
*21 years showed a gain (84%)
*4 years showed a loss (16%)
*The average gain was over $7,576
*The average loss was -$1,573
*The largest gain was over $27,000 (2008)
*The largest loss was -$3,790 (2012)
Also for the record, these results include no deductions for slippage, commissions, taxes, etc. and use futures data that I have had sitting on my computer which are assumed to be accurate.
Note too that these results do not take into account the sheer terror that can be associated with holding any position in natural gas futures – even if things are going your way at the moment (trust me on this one) – because this market can be incredibly volatile and can turn on a dime.
A few notes:
*There clearly seems to be “something anomalous going on” in natural gas in the month of June.
*There is (sadly) no guarantee that these anomolies will play out in June 2015 as they have in the past.
*The last time I wrote about natural gas tendencies in the month of June it ended up being the worst year ever to follow these trends (Still think I am just paranoid when I say “Murphy hate me”?). So I think we all know what that means.
*Trading natural gas futures is absolutely, positively “not for everyone.”
Thanks to the advent of ETFs and options on ETFs there are ways to play these trends without ever trading a futures contract.
I’ll plan on revisiting this topic as the June seasonal time frame draws closer.