» » Valor View – Natural Gas – Feb 19 – Vol falls off the cliff

Valor View – Natural Gas – Feb 19 – Vol falls off the cliff

  • Our call about fading the after-close vol move higher proved to be prescient
  • Vol fell below Friday's close and closed there at the end of the day
  • It dropped early in trading and it fell hard through Bal20, falling the most in Mar and Apr'20
  • Vol being below Friday's levels is not giving us confidence in the rally
Image
April Intraday Price & Vol
  • Vol may have been below Friday's levels but April and May options are showing clear signs of puts getting sold and calls getting bid
  • April and May contracts are not showing any potential of LNG send out curtailments in the next couple of months
  • The put skew has become cheap relatively and may present a skew buying opportunity if ATM vol falls further
Image
April-May Skew changes
  • Today was mostly quiet except for the H/J move lower which even led the JV fixed price higher
  • We can expect high H/J volatility into the Options Expiry as traders unwind the H/J CSOs
Image
H/J vs H
  • Biggest volume today was on Mar'21 $2.00 xd put which seems to be attracting interest on both sides as a vol and skew play
  • Many of the front Option Volumes have been concentrated in the 1.75-1.85 area
  • Combined with the option volume interest and looking at the high Open Interest strikes, we suspect that if there is any break in weather or return of warm weather forecasts over the weekend in the long range, Mar futures could go back to the 1.85 area or 1.80 even
  • Without lack of new catalyst, we probably drift toward the highest OI found at $2.00
Image
March Open Interest
Image
Top Trades

Subscribe