DAILY MARCH NATURAL GAS FUTURES CHART
The first item I notice and the most important item that I believe is that we are at the highest price in natural gas in almost four years! What that has caused on this monthly natural gas chart below is a "break-out" of the trading range that started in about August of 2010. More importantly to me though, is that it is a "break-out" to the upside. The reason I call this a "break-out" to the upside is because the market has closed above the top line of the Bollinger Bands (light blue shaded area).
MONTHLY NATURAL GAS FUTURES CHART
Since, I am now bullish on this market, there could be several ways to play it with options. You could buy straight call options or bull call spreads in a 3-to-1 ratio with a put for a hedge or "insurance" in case the trend changes on a dime and the market falls. Another potential play would be to sell naked options or option spreads — again with protection maybe in the form of a futures contract or with other option plays. Remember, when you sell naked options you have unlimited risk and should have a "well-funded" account of risk capital.