March / April Natural Gas Spread - Widowmaker Set For a Move | MartinKronicle - Michael Martin
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March / April Natural Gas Spread – Widowmaker Set For A Move

naturalgasspread

Click for larger image.

The March/April Natural gas spread seems to have bottomed and actually settled at a new near-term high at 4.7 cents premium to the March. You can look at spread charts the same way you look at charts of a single commodity. One blast of a cold front, and this spread can be off to the races.

Here is what the quote board looks like:

gasboard

Click for larger image.

The red box indicates the two contracts that comprise the spread. You’ll see that March trades 4.7 cents higher than April. That’s the same difference represented in the spread chart up above.

This chart will go higher as March outperforms April. That means if March rises more than April or March falls less than April. In order to trade this spread, you’d enact the following trades AT THE SAME TIME.

Buy March NG
Sell April NG

You can buy or sell the spread (both contracts together) “at the market” or at a Limit price.

A limit order would be entered as “…at 5 cents to the March or better.”

With this type of order, you will not get long March or short April unless the difference between the contracts can be done at a price differential of 5 cents premium to the March side OR LOWER. The current level of 4.7 cents premium to the March satisfies this Limit order.

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  • Manuelbravochico

    NG is the most volatile traded futures contract on the planet as well as one of the most fundamentally isolated ones as well. Just look at the correlations with all the other markets.

    This is one of the few markets where I believe one could actually structure a course to specifically learn how to trade/analyze this specific market.

    I’ve tried to educate myself on it, but the websites out there are mostly people in the actual industry working on the rigs. That’s great, but they do not integrate their analysis with the trading aspect of it. Brilliant fundamental analysis on NG and actually making money trading NG are not the same thing.

  • Anonymous

    Spreads are living, breathing mechanisms and they have a life all their own.