The deal between Russia and China to build a new pipeline to send natural gas from the former to the latter didn’t get much attention when it was announced last week. But it did manage to keep the price of natural gas moving higher off its lowest price in the past nine months. And that pulled the price of UNG, the ETF that tracks the price of natural gas, off its lowest price ever. With cold weather approaching, and the possibility of a reduced supply for Europe, that could keep an upward bias on the price of UNG. UNG’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside. That might be enough for a trader to consider a bullish strategy. UNG’s IV has been falling a bit as the ETF has rallied, but its 53% overall IV and 32% IV rank are still high enough to make short premium trades attractive. If you think UNG might keep rising over the next few weeks, the short 12 put in the October expiration with 38 DTE is a bullish strategy that has an 85% prob of making 50% of its max potential profit before expiry, and that generates $.92 of positive daily theta.
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