DailyPlay – Opening Trade (UNG) – January 30, 2023

UNG Bullish Opening Trades

View UNG Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 14 Contracts March 10th $10/$12.50 Call Vertical Spread @ $0.69 Debit per contract.

Total Risk: This trade has a max risk of $966 (14 Contracts x $69).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend.

1M/6M Trends: Bearish/Bearish

Technical Score: 1/10

OptionsPlay Score: 108

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

Stocks continue their upward ways, now just a few days from the all-important Fed meeting on Wednesday. Investors will be closely watching and listening to Jay Powell’s words, both for content and tonality. This Fed statement – along with the employment report on Friday and the slew of major firms reporting earnings this week – will set the tone for how the market trades up to and even possibly through the next monthly CPI figure on Feb.14th.

I don’t expect much fireworks this week till the Wednesday announcement, so don’t look to over trade or push the envelope on trades before then. I’ll likely use tomorrow and Wednesday morn to lighten some of our bullish positions into the number.

I do have a new idea for today, and because it’s in the commodity arena, I don’t expect for the Wednesday party to influence this trade. Natural gas has gotten completely obliterated in the past several months, as a way warmer than normal winter has been at hand in the US as well as commodity funds having been caught too long from 2022’s rally. (Just as an example, total snow accumulation in NYC has been less than 1” this winter, and it’s typically averaged 25” by this time of the year.) Temps here have hit 50 degrees here several times in recent weeks. Natural Gas demand has been reduced as one hasn’t needed to heat their homes to the degree as one normally would.

Natural Gas Futures – Weekly

However, this week could very well mark the first Aggressive Combo -13 signal of the entire decline, and it was this same signal that marked both major highs last year. Although the associated ETF UNG doesn’t exactly match the price movement of front-month Natgas, we can look to start building into a long position this week. 

I can see doing this in two separate ways, or possibly in a combination of both. Using options, you can buy a 1% position in the UNG March 10th $10/$12.5 call spread. It closed at 69 cents mid on Friday – a fairly priced 28% of the strike differential. Alternatively, you can look to buy a 1% position in the stock itself. Or thirdly, you can do a combination of both to give yourself a standard 2% bullish position.