Comments on: GOLDMAN SACHS WAS WRONG ABOUT NATURAL GAS….OR WERE THEY? http://pragcap.com/goldman-sachs-was-wrong-about-natural-gas-or-were-they Fri, 19 Mar 2010 05:25:00 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: TPC http://pragcap.com/goldman-sachs-was-wrong-about-natural-gas-or-were-they#comment-6512 TPC Tue, 29 Sep 2009 16:41:03 +0000 http://pragcap.com/?p=9768#comment-6512 Robert, Good points. I don't have the exact trade data so it's impossible to know.... Robert,

Good points. I don’t have the exact trade data so it’s impossible to know….

]]> By: Robert in Chicago http://pragcap.com/goldman-sachs-was-wrong-about-natural-gas-or-were-they#comment-6511 Robert in Chicago Tue, 29 Sep 2009 16:37:23 +0000 http://pragcap.com/?p=9768#comment-6511 You are ignoring the enormous contango in gas futures, which makes the numbers less impressive (although still impressive). The October contract's last day of trading was yesterday. That was the front-month or "spot" price at the bottom in early September. It bottomed at $2.50 and peaked Friday at $4.00 -- a gain of 60%, not 100%. Meanwhile, for this entire period, the November contract was a full $1 higher; it bottomed at $3.60 and is now $4.90, a gain of 36%. The October-November spread is merely a function of seasonality; gas inventories peak in September and then subside as households turn on their furnaces. January gas was yet another $1 higher; it bottomed at 4.72 and is now 5.95. So unless that options buyer timed things perfectly, they bought those calls when their underlying was above $5, not below $3, and their underlying has risen "only" around 20%. You are ignoring the enormous contango in gas futures, which makes the numbers less impressive (although still impressive). The October contract’s last day of trading was yesterday. That was the front-month or “spot” price at the bottom in early September. It bottomed at $2.50 and peaked Friday at $4.00 — a gain of 60%, not 100%. Meanwhile, for this entire period, the November contract was a full $1 higher; it bottomed at $3.60 and is now $4.90, a gain of 36%. The October-November spread is merely a function of seasonality; gas inventories peak in September and then subside as households turn on their furnaces. January gas was yet another $1 higher; it bottomed at 4.72 and is now 5.95. So unless that options buyer timed things perfectly, they bought those calls when their underlying was above $5, not below $3, and their underlying has risen “only” around 20%.

]]> By: Jimmy http://pragcap.com/goldman-sachs-was-wrong-about-natural-gas-or-were-they#comment-6510 Jimmy Tue, 29 Sep 2009 16:17:47 +0000 http://pragcap.com/?p=9768#comment-6510 basic reversion to the mean, the 'smart' hedge fund could had known that there should be some reflex bounce back soon due to the 'rubber band' affect. same goes for the stock market before last spring where a reversion back to the mean was eventually going to happen sometime by summer time. basic reversion to the mean, the ’smart’ hedge fund could had known that there should be some reflex bounce back soon due to the ‘rubber band’ affect. same goes for the stock market before last spring where a reversion back to the mean was eventually going to happen sometime by summer time.

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