Natural gas dollar sign flameOver the past few days, many of the major futures markets slowed down in anticipation of the Christmas holiday.  In the United States, the futures market re-opened today after being closed on Monday for the Christmas holiday; but with the New Year holiday around the corner, the expectation is that the markets will likely remain quiet for much of this week as well.

This was evident in the equity futures, which traded their lowest volume of the year last week; and even gold and currencies experienced a mostly quiet trade. However, if you are looking for a market that may be moving during an otherwise quiet week, you might consider natural gas futures.

Every week, usually on Thursdays, the U.S. Energy Information Agency (EIA) releases a list of inventory figures on natural gas that is perhaps the most relevant measure of supply and demand for this product. Winter officially began last week, and this time of year is often the most volatile for this future as cold fronts can often push the price much higher, while warm fronts may decrease demand pushing the prices lower.

In any event, although most markets were quiet, the daily chart below shows that NatGas was very active last week and could quite possible continue its activity this week.

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The natural gas market can make some extreme moves as hedgers reduce risk, and it can be a difficult market for small speculators. That’s where binary options come in which allows traders the opportunity to position trades on this future’s market, with contracts that have a $100 base value each, offering both daily and weekly expiration’s.  The trade examples below are not recommendations but are given to illustrate how binary options trades based on the Natural Gas futures market might work.

The table below shows weekly binary options currently available that expire this Friday at 2:30 pm EST. Currently, the underlying future is trading at 3.719.

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If you are bullish and think this market will continue rising, you might purchase the 3.750 strike at the offer of $47.75 per contract, which would be the amount of your risk.  The potential reward on a settlement above the strike price would be the difference between the purchase price and the $100 value, or a profit of $52.25 in this case

On the other hand, if you are bearish and think this daily chart is double topping, you could sell the 3.650 strike at the bid for $57.75 per contract.  When selling these options, you want the price to settle below the strike price.  Your potential profit would be the sale price ($57.75), while the risk would be the difference between the $100 base value, or $42.25 in this case.

Traders may implement many other strategies using these options, but these are just a couple of examples giving you an idea of the flexibility and cost control that are available when trading binary options.

 

Note: Exchange fees not included in calculations.

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Trading on Nadex involves risk, which may result in financial loss, and may not be appropriate for everyone.  Any trading decisions that you may make are solely your responsibility.  The information presented in this webinar is for informational and educational purposes only.  The contents of this webinar are not an offer, or a solicitation of an offer, to buy or sell any particular financial instrument offered on Nadex.  Past performance is not indicative of future results.