Natural Gas just crashed by 110 rupees in just 4 trading session

Commodities
1

While on friday, Natural Gas recorded one of its best gains in a day, the following 4 sessions were disaster for it. From 494, it reached 380 levels. As i am new to this commodity, i dont know much about how the price works but for an international commodity, price falling 20-22% in just 4 sessions is a bit concering, and when it has gained 10% in single session. There must be some reason as to why it had gained on friday, 5th december, and just day after all the news and sentiments turned against.

I have taken positions in it, fortunately at lower levels, and shorted puts of 380,370,350,335. I was ok that if it turns ITM, it will get assigned and i can hold it in my portfolio, but then i got to know that unlike silver or gold, you cannot purchase them for long term (like etf). And the futures are also priced very different. In my last post i mentioned about it, October at 280, November at 340, now December at 380, and january is showing 360.

Any way, if the positions turn ITM, then i can hold it for long term and use covered call strategy? If we are trading options, the underlying should be there for purchase too (not futures)

1 Like
2

Not familiar with commodities, but the assigned futures also have a expiry - likely 1 month. And then there would be mandatory physical delivery of barrels or whatever that is used for transportation of gas. But Zerodha would close your position to avoid physical delivery.

3

For context,

4

Commodity options devolve into futures of the same month, typically with expiry a few days after option expiry. Most brokers do not support physical delivery so your positions would be auto-squared, i.e., settled for cash. :money_with_wings:

With NatGas, you cannot take assignment even if you have the cash, there’s no delivery. It’s all very dangerous! :warning:

2 Likes