Bearish Options Trading On The Natural Gas ETF (UNG) Rose To A Record
“Trading of bearish options on the U.S. Natural Gas Fund rose to a record as the fuel fell to a seven-year low and investors bet that the exchange-traded fund tracking gas futures will keep tumbling. Volume for puts giving the right to sell the ETF rose to 220,165 contracts, or 2.6 times the four-week average, as options traders bought the contracts to protect from a further drop if the fund extends its 61 percent slide this year. Puts traded 1.4 times more than calls, which give the right to buy the shares,” Jeff Kearns and Asjylyn Loder Report From Bloomberg.
“The fund, known by its (UNG) ticker, lost 4.7 percent to $9.01, the lowest level in its two-year history. The most-active contracts were October $7 puts, which rose 52 percent to 35 cents and accounted for almost an eighth of put volume. Ninety- four percent of those puts traded on the ask price, which indicates that buyers initiated the transactions,” Kearns and Loder Report.
“The fact that the most activity is around such an out-of- the-money put means people are expecting an extreme down move in the (UNG),” said Rebecca Cheong, an equity derivatives strategist at Societe Generale SA in New York. “There’s a lot of concern.”
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The investment (UNG) seeks to replicate the performance, net of expenses, of natural gas. The trust will invest in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire. It is nondiversified.