Natural gas negative rolling yield collection strategy based on inverse UNG trading

Strategy idea – maintaining of short position in UNG in the amount of equal to own funds available on the each testing (rebalancing) date – every first working date of each month.

This model is a part of trading algorithm that used by OilGasFund as hedgefund at https://collective2.com/details/126786783

Source of trading model positive expectations – based on historical observations 90% of the time Natural gas futures term structure is under of contango effect and it creates the negative rolling yield with the average level of decline 24% per year. This negative yield is draining value from UNG and is a source of growth for strategies that exploiting it and gradually selling of Natural gas.

Major strategy update

  • From the inception of the last year, the UNG inverse trading model demonstrates positive deviation and for 12 months total return is +39.1%.
  • Modeled inversely traded UNG fund value is 160,991 points and total CAGR of the simulated portfolio since 2007 is 22.16%
  • Short position will be maintained by Oilgasfund in UNG or through out long in PUT options at least until the moment of time when the Portfolio index illustrated below will cross its exponential CAGR.

Implementation in trading model

This is the monthly update of UNG inverse trading model. This is a trading strategy (contango monetization) that Oilgasfund use alongside with Value investing and is a part of the algorithmic model of portfolio management.

Strategically maintained a short position in Natural gas is cyclical prosess and there are periods to move out from short position. These periods associated with the extension of investments in Natural gas industry with upside in CAPEX and labor force. In this respect, OilGasFund algorithm did not consider the winter 2018 – 19 spike in price as fundamentally based and it was not supported as an instance by the growth of capitalization of Natural gas producers.

OilGasFund still stands on the sell side, expecting a new cycle of price decline in Natgas with huge contango impact and as a result with a big positive rollover yeild from short. Negative rolling yield for the last 2 years was on the cyclical top due to Deficit conditions that appeared in US storing facilities.

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