Natural Gas Weekly Recap: The Weather Rug Pull & Vol Aftermath | Feb 1-5, 2026
February 10, 2026
NG's wild week - an 80+ cent sell-off, March vol crushed 32%, and the winter rally narrative gets tested. Free weekly market recap.
The Big Picture
What a week in natural gas. On Friday, some traders were saying we wouldn't see $2 this year. By Monday, many of those same traders were wishing they were farmers.
- Weather whipsaw strikes again: This winter's recurring pattern of cold forecasts turning warm continued — but the one time it didn't flip (over the long weekend), cash went to $50+ and futures past $7. That left scars.
- Overbought unwind: Heading into this past weekend, CTAs were max long and traders were nervous about getting caught again. Weather flipped warm, triggering a massive unwind.
- Historic sell-off: JV26 traded 500+ lots/day on screen in an unprecedented 80+ cent sell-off on the strip. Over 50,000 TAS contracts traded, followed by a rally into the close as stop-outs and CTA repositioning created violent two-way action.
Key Themes This Week
1. The $5 Strike Story
- $5.00 was identified as the highest open interest strike — the max pain level — before the long weekend.
- $5 options were trading at just 2 ticks. As weather continued to add cold and the market discussed the biggest storage draw ever, those 2-tick options reached 50 cents.
- OI on Feb $5 and $6 calls came down as both longs and shorts closed positions.
- Just before February OPEX on 01/26, activity in Feb $7 calls picked up — but CME had multiple problems on expiration day, and those $7 calls never went in the money.
2. The Sell-Off & Vol Repricing
- March implied vol sold off roughly 32% from its highs — the move down in price was much larger than anyone expected.
- Skew dynamics were nuanced: The 4.50 calls that were near ATM on Friday ended up at roughly 20 delta after the sell-off, gaining vol from steeper skew even as ATM vol and call skew compressed.
- Vol changes by strike told a different story vs. delta: put vol declined while $4–$6 calls actually gained.
- May through August calls were making new highs, likely driven by lower end-of-season storage projections.
3. Options Flow: From Calls to Puts
- Early in the week: March $5.00 and $6.00 calls were the highest volume contracts — a change from the usual dominance of March $3.00 puts. Mar/Apr $1.00 call spreads were back at 3.5 cents, and V/F -$0.75 calls traded around 5.5 cents.
- Mid-week (EIA report): Came in slightly bearish (1 Bcf higher draw than expected at 359 Bcf), reversing the previous day's rally. Q2 put flies (3.00/2.75/2.50) started trading at 3 cents.
- Thursday (Baker Hughes): Haynesville rigs up +7, triggering another reversal. Mar 3.00/2.75 put spreads crossed in huge size at 4.2 cents, and Mar 2.75 puts saw 61,000+ contracts on CME.
4. Back-Curve Vol & The Deferred Bid
- While front-month vol was getting crushed, the back of the curve told a different story.
- JV28 $4.00 calls were lifted at 28.5 cents early in the week.
- By Wednesday, JV27 was gapping higher on bids with $4.00 calls trading at 31 cents.
- Cal'28 was going bid across the board.
- Winter vol and summer '27 remained well supported even as the front corrected.
5. Storage, LNG & The Structural Puzzle
- End-of-season storage estimates: Settled around 1.6–1.7 Tcf on the Henry Hub side, with V26 balances at 3.7–4.0 Tcf.
- Key question: Do those levels justify $2-handle targets, or does the market need to stay elevated?
- LNG frustration: Even when Hub cash was north of $50, LNG barely budged — especially at Venture Global facilities.
- With SALTs running low and production still not back to pre-rally levels, the structural picture remains complicated even as weather risk fades.
6. Spread Activity
- Oct/Jan spreads continued their widening theme.
- The -2.00/-0.50 fence traded at 3 cents to the puts.
- -1.25/-1.50/-1.75 put flies traded at 2.6 cents (a V/F widening to -1.50 trade).
- Mar/Apr structures and calendar spread options remained active as traders repositioned around the new seasonal outlook.
What We're Watching Next Week
- Weather models: This winter's pattern has been cold-flip-warm-repeat. Any shift back to cold could reverse the move just as quickly.
- March expiry dynamics: With vol crushed, gamma positioning into March expiry will be key. Breakevens are high without weather support.
- Back-curve vol: JV27 and Cal28 are seeing real demand. Is this the start of a sustained bid in deferred vol?
- Haynesville production: The +7 rig count already moved the market. Production recovery pace will shape the EoS narrative.
- EIA storage: The weekly number will either confirm or challenge the 1.6–1.7 Tcf EoS consensus.
Beyond the Surface: What Our Premium Reports Cover
This free weekly recap gives you the narrative — but the real edge is in the data. Our daily Valor View newsletter and VALR EOD Reports provide institutional-grade analytics including:
- 65+ daily charts covering straddle tables, skew progression, vol heatmaps, break-even surfaces, and seasonal overlays for NG, CL, and HO
- Option Matrix with vol changes by both strike and delta — critical for understanding how the skew reshapes on big moves
- Spread analytics (H/J, calendar spreads, CSOs) with historical context and the new Spreads Matrix with fly views
- Vol termstructure analysis showing exactly where the market is pricing risk across the curve
- Intraday volatility tracking across the full term structure
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