Valor View – NG – Dec 18 – Weather Plays & Holiday Distractions

Market Overview

• War and weed is in the air to keep you distracted from the E files
• The distractions also include announcement of "Hunger Games"
• Similarly, Natty market tried to be distracted with some weather coming back story, but traders are not having any of it
• Even with the rally mostly FG was trying to stay bid, but HK and summer aren't really in the mood for a bid
• Puts on strips like HK (Mar-May) tell you market cares more about the potential for weakness in low demand and high production, rather than FG
• This is a great comment that expresses the rush for buy more weakness

Key Trades

• Mar/Apr -0.05 put traded 2.7 cent 8,000x and that's the most brilliant trade of today. Mar/Apr flat put traded 0.054
• Mar/Apr 0/-0.10 1x2 ps were also active for around 2.7c~
• Mar-Dec 3.50/3.25 put spread traded 11.2 cent. Idea is to just leave the Jan-Feb in case weather returns, but the downside beyond that is a certainty according to this market
• Apr/Oct CSOs got active like clockwork too
• J/V -0.75/-1.00 put spread traded 0.035
• J/V -1.00 put traded 0.022

Options Flow

• Call selling is still going on
• Nov 4.00 calls got sold for around 52c
• I can't believe it 35-36 vols of Nov-Dec
• Check out the move in X and the daily BE

Vol Analysis

• Red winter vol is already making new lows

• Vol traders keep eyeing it, bu they all know there is pain on it before any gains
• Your Ususal Suspects are selling Jan 27 7.00 calls for 36 something cents
• Mar'27 calls still have some bid interest. It is the exact playbook from a year ago
• Jan '27 calls 10.00 calls are down to 5~ something cents. Already lowest in 5 years

Outlook

• This is a very weird behavior by the market. Seems early and seems to have full faith in not much cold coming back and high EoS
• JV 2.5/2.25 1x2 put spread traded 4 tics. Makes me cringe
• But then, I see Cal '28 2.25/2.00 1x2 put spread trading -1.9c which made me shed a tear. Is this what trading is going to be all about?
• Q2 5.00 calls were hit for 5.9c
• Essentially, nothing bullish on the horizon
• But, if some decent cold comes back, will there be another round of stop outs in the $1 range?