Friday, November 11

Today we look at continued gains in UGAZ and what that might mean for prices after the weekend

UGAZ – The market opened significantly closer to Wednesday’s close at 22.30, we shouldn’t see this trend continue – OPEC’s failure to agree to a production freeze means that prices will inevitably fall back to around 20.00

DGAZ – This means we’re going to see a sharp rise in DGAZ, if not today then by Monday morning. We might even see prices as high as 9.50 again like we did Wednesday morning. I expect prices to open dramatically higher on Monday, and would recommend holding any position until then.

Cornerstone Strategic Value Fund

Today we add a new asset

Recently I have added Cornerstone Strategic Value Fund (CLM) as a substantial part of my long-term holdings. CLM is a dividend distributing security that as far as I can tell is currently undervalued. For fy-2016 they are distributing 0.28 per month per at a price of 14.28 which means they are promising dividend backed growth of nearly 23% annually.

While the distributions will fall next year to 0.22/share, this is still impressive growth and impressive future value. If this trend were to continue these shares are still very undervalued, and I could see up to a $3 increase in value during the next year.

While everything is a risk, and no one can ever be certain I am confident that this is a safe long term position to hold.

DGAZ Loss

Today we lost

Today I’d like to go into the story of my first (and fortunately my only) big loss. Yesterday I opened a position in DGAZ in advance of the EIA weekly storage report being down from last week. Unfortunately I had not realized that analysts had anticipated worse than this, and so the price of natural gas spiked, immediately sending my position into a nose dive.

By the end of the day it was down nearly 8%, and based on longer term value assessments of DGAZ I decided to wait it out. The next day it opened 5% up, and my losses were dramatically lessened. I made the decision to close, 3% down and somewhat shaken by my first negative encounter with a highly leveraged ETF.

By the end of that day my position would have been down 12% so I am somewhat pleased that I made the best of a bad situation, but I am disappointed that I missed a fact that everyone else saw. In the future when trading with DGAZ I will place a hard limit order as an exit strategy, as my queued order wasn’t able to execute fast enough to get me out as the price dropped.

Friday, October 14

CHK is very risky

Today I ended a position in CHK that I took on Wednesday for a fraction of a percent gain. I feel fortunate that I was able to execute a the price I did, because the price of CHK fell nearly 5% during the remainder of the day.

My intention in opening this position was to increase exposure to natural gas prices – traditionally CHK has been a very reliable way of doing this, and given their recent corporate issues it seems reasonable that increased gas prices would do their price a world of good.

Unfortunately they simply have too much unpredictable volatility, counter to increasing futures prices throughout the day their stock price fell. I have yet to fully determine why this was, but I suspect there may have somewhere been news of further instability.

The lesson here is that no security will ever fully match exposure to natural gas futures like a pure play in natural gas futures.