This seasonal trade could work wonders. All it needs is an X factor.
A gas traders playbook Every trader is like a cricket batsman. A batsman knows he cannot score a boundary on every ball. He focuses on taking a single or a double as often as possible, and waits for an opportunity to score a perfect boundary.
Similarly, gas traders are treading water (trading for small profits) in other parts of the year. Winter is the season for catching profitable whales (equivalent to scoring a boundary in cricket). No gas trader worth his salt will take time off during this time of the year.
This is his time to earn his bread, butter, jam and chocolates! Seasoned traders know markets discount events in advance. They make their moves before such events to stay in step with the markets. So they start trading November gas futures in September itself.
The reason is that the derivatives (futures and options) markets offer at least three monthly contracts, if not more, to trade simultaneously. Which means the November series gets active in September itself. Since winter has not yet set in, the price remains sluggish.
As we near the end of September, you will notice the magic of seasonal trading begin in earnest. The price of gas starts to rise. But that is not all.
Cost of carry (financing cost or interest charges payable by bulls) rises sharply. So September futures could trade at ₹180, October at ₹210 and November at ₹255. These are actual prices as on Friday, 30 August 2024.
What we have noted is that bulls are paying about 20% financing charges per month to carry over their long positions. This is based on hope that winter will witness a huge rise in demand from the indoor heating industry. This is more or less correct.
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