Trader sees limited gains in natural gas
Chris McKhann | firstname.lastname@example.org
The UNG is up 3.9 percent to $16.80, continuing to rebound since hitting an all-time low of $14.25 on April 19. The bounce brings the exchange-traded fund only back to where it was at the end of March, and it traded above $50 last June.
optionMONSTER's systems detected a trade involving more than 6,000 each of the in-the-money May 19 and 18 puts. The big blocks of 4,688 saw the May 19 puts bought for the ask of $2.44 and the May 18 puts sold for the bid of $1.58. The volume at each strike was more than open interest, so this is a new position.
The put spread cost the trader $0.86, which is the amount that would be lost if the UNG trades above $19 at expiration. The maximum gain of $0.14 will be made if the fund remains below $18.
Most traders pursue this type of strategy by selling call spreads that are in the money, as opposed to buying in-the-money put spreads, but they essentially serve the same purpose. (See our Education section)