Understanding commodity ETF decay

Pavel Hála | Quantitative trading | 1. 3. 2017

In the previous article, I explained compounding effect and the reason why leveraged ETFs lose value over time. Today, we’ll take a look at commodity ETFs. These funds can decay very fast, even if they are non-leveraged. That’s because the mechanism of decay is of different nature than that of leveraged ETFs holding stocks. Most…


The widow maker spread ended in slight backwardation

Pavel Hála | Analyses | 26. 2. 2015

Unlike last year, when the widow maker spread expired in pretty wild backwardation, it finished yesterday in a quiet mood. But let’s explain a little bit about this spread. I’m talking about interdelivery natural gas spread between March and April, NGH15-NGJ15. Consumption of natural gas is usually high in winter due to heating demand. Consumption…


Natural gas at resistance

Pavel Hála | Analyses | 1. 4. 2013

Natural gas is at $4 which was an unbreakable resistance that turned the price down last year. Actually the price broke over $4 on Wednesday but pulled back on Thursday and is hovering slightly below $4 right now. Check out our chart of most liquid May future contract: So what now? Will the last year…


One of my favorite natural gas trades

Pavel Hála | Trading ideas | 18. 2. 2013

Time has come to enter one of my favorite spread trades. It’s in NYMEX natural gas – NGQ13-NGM13. I made money on this spread every single year during last five years. I consider NG to be a great commodity for spread trading. This spread trade is also a very conservative because you can set just…