RE: RE: We are approaching storage limit soonOne story I've heard that makes sense to me is that the big producers who can afford to supply gas to the market at a loss will do so to run the little producers out of business, hence assuring greater profitability once the demand/supply imbalance turns the other way.
Questions for me are, if above is most plausible scenario, 1) what kind of hedges against this scenario are both big and small players using? 2) How might these hedging activities themselves influence the probability of this seemingly most "pluasible" scenario (i.e., big fish eat little fish to grow bottom line) coming about through falling prices?
For example, if I were a little producer with debt and not much cushion and I "knew" that prices were going to fall, I would bet the farm that prices would fall--I'd buy puts. Maybe I'd even go so far as to use those puts as collateral against a short on HNU or possibly a long on HND depending on my time horizon I suppose, if that were possible--what would I have to lose?
Basically, I'm thinking on these lines as I do not find it plausible that a bull/bear market in natural gas means a no-brainer with respect to buying HNU or HND. That is, it's big guys playing financial games all the way down. We see this starkly when there is a 15% snapback in the price of gas from one day to next. Fundamentals only seem to come before market activity, as when we speak of the future direction of gas prices as an effect of supply and demand. The reality, I'm betting, is fundamentals are a convenient way of explaining what is going on in the market or, alternatively, what should be going on in the market. Price is THE fundamental.
Who's with me here?