Valor View – NG – Jan 30 – 50 Cent Rally & Weekend Weather Risk

Market Overview

• And... just like that a 50 cent move
• Market is now running in scared, what ifs mode
• What if we get more weather with no SALTs or low SALTs
• No one wants to go short over the weekend. Not outright anyway
• Especially when everyone is scratching their head about why LNG didn't shut down more with $30-$50 cash
• March vol up 23%, but puts barely sold. How does that happen? Tells you no one wants to be outright short, but realized we have room to go down if weather fails
• 100 vol March puts will not pay though. We could be down $1 next week and vol will still come off 40%. Run that analysis before you buy any March puts outright. Ratio spreads will outperform and are very very cheap

Price & Vol Analysis

• This are great charts to see what happened in the market today
• Futs and atm vol were up just one for one
• But, interesting divergences in Mar and JV positioning
• March calls got bid (but not overtly so), most of the March up move was just in ATM. Relatively, I will call the call move weak. Still went higher, but JV call skew actually went down
• I guess the assumption is either weather or producers will call a top on JV?
• On the put side, JV puts went bid too

Key Trades

• Same thing shows up on the Trades also
• March 5.00 and 6.00 calls the top trade
• However, look at the block traders which almost matched screen on volumes
• Apr 3.50/3.00 1x1.5 put spread
• May 2.75/2.50 put spread
• June 2.50/2.00 1x2 put spread 0.013
• Oct 3.25/2.5 put spread
• Q2 3.80/3.50 put spread

Calendar Spreads & CSOs

• Similar positioning in CSOs as well
• With such high volatility H/J CSO call spreads are extremely cheap
• Mar/Apr 0.25/0.50 cs 0.055
• Mar/Apr 0.25/0.50/0.75 cfly 0.025
• Oct/Jan spread is still going for the widening trade
• Oct/Jan -1.50/-2.00 1x2 put spread 0.033
• Oct/Jan -2.00 put 0.032

Vol & Outlook

• As has been the norm lately, with interest on both sides, the range is very wide and vol keeps rallying
• I wish I had bought some of those Jan'27 6.00 calls for 26 cents. Where is that guy now?
• Today, Mar'27 20.00 calls got quoted around 1.5-2.00 cents
• But, sure there is no bid for any vol beyond that JV'27. Cal'28. Dirt cheap
• The guys who are long it keep quoting to see if there is any bid, but there isn't any still
• That's the problem with back vol, you could be sitting on dirt cheap stuff, but if no one wants it or dumb producers offer more. Nothing you can do
• I mean the dumb ones, not the ones who are my clients 😄
• Silver had no buyers today or Gold. Let's hope weather stays in gas