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Natural Gas Options Summary

The bullish expiration of the December 2016 futures contract has followed through to January 2017. The options market reinforces the rally. A positive call skew is evident in the winter months. The Jan 2017 $3.75 (~25 delta) and $4.00 (~10 delta) calls are bid. The Jan 2017 $4.00 call was the largest volume traded strike on Monday. Call strikes that were considered unachievable a few weeks ago are now in play. Even the Jan 2017 $5.00 call traded, though in small volume. The Weighted Average Strike Price based on Open Interest (OI) has risen dramatically for both calls and puts. In Jan 2017, the Weighted Average Strike Price calculated from call OI settled at $3.48 and from put OI at $3.17. The Call vs Put ratios based on Volume and OI are in favor of calls. EIA Natural Gas storage data holds greater importance with cold weather on the horizon. A large draw could step prices even higher. The options data, including the rise of the At-The-Money implied volatility, shows the options market prepares for a continuation to the upside.

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Lou Pellathy
Energy Blogger
http://hydrocarbonreports.com



Lou Pellathy

Posted by Lou Pellathy

Energy Blogger

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