KO KOLD ProShares UltraShort Bloomberg Natural Gas Loading... : Investor Sentiment and Bull/Bear Views

The author argues natural gas prices spiked because of a storm and will decline as the storm's effect fades. They express this via a short position in the -2x leveraged ETF KOLD. The holding period is open-ended until profit or bust. Reported returns track the underlying asset, not option P&L.

The author shorted natural gas via the -2x leveraged ETF KOLD. The causal mechanism is that natural gas prices spiked during a storm, and now that the storm is over, prices will decline. The author intends to hold until profit or bust. Reported returns track the underlying asset, not option P&L.

The author is long KOLD at $21, arguing that recent Midwest snowstorms spiked natural gas demand and sent BOIL up nearly 80%, but as the storm passes and forecasts normalize, temporary demand will lessen, causing natural gas to pull back and KOLD to rise. The EIA report showing supply catching up is cited as further support for the KOLD long. The main risk implied is that demand could stay elevated longer than expected.

The author argues that the recent Midwest snowstorms spiked natural gas demand, pushing BOIL up 80%, but believes this reverses as the storm passes and demand lessens, driving KOLD higher. They cite the EIA report showing supply catching up as further support for KOLD gains, expecting up to 50% returns. The catalyst is the storm passing and the EIA supply data; no specific risk is stated. Reported returns track the underlying asset, not option P&L.

1. THE FACT: European household gas demand tracks temperature exponentially, especially in sub-zero territory. January is forecast to be cold in NW Europe, well below the norm. This could lead to Europe consuming up to 63bcm in January, 21% more than last year. 2. THE BRIDGE: Significantly colder-than-normal temperatures in NW Europe in January will lead to a substantial increase in natural gas consumption, potentially straining supply and driving up prices. 3. THE VERDICT: Forecasted cold European weather in January will significantly increase natural gas demand, likely leading to higher prices.