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 NYMEX Natural Gas Futures and Options Market Trading

                                                               

The No Nonsense Guide to Buying and Selling Options

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*The information contained within this webpage comes from sources believed to be reliable. No guarantees are being made to the content's accuracy or completeness.

 

The History of the Natural Gas Futures Market Trading

Natural gas is a colorless, shapeless and odorless fossil fuel in its pure form. It is a mixture of hydrocarbon gases formed primarily of methane but it can also include butane, ethane, propane and pentane. Around 500 B.C., the Chinese discovered that the energy produced by igniting natural gas could be harnessed and used as a desalinization tool. Ancient Chinese would use crude bamboo-shoot pipes to pass the gas through and ignite it to boil sea water to create potable fresh water. Around 1785, Britain became the first country to commercially use natural gas to power street lights and indoor lights. In 1821, William Hart was the first man to dig a well for the specific purpose of obtaining natural gas in the United States and is considered the "father of natural gas" in America.

It is domestically produced and readily available to end-users through the existing utility infrastructure, natural gas has also become increasingly popular as an alternative transportation fuel. Natural gas accounts for almost a quarter of United States energy consumption, and the NYMEX Division natural gas future contract is widely used as a national benchmark price. Roughly 50% of the heating needs for the United States are supplied by natural gas. The United States is considered the Saudi Arabia of natural gas because of the huge supplies trapped in shale deposits and in the Gulf of Mexico.

 

Natural Gas Futures and Options Quick Facts

  • 10,000 mmBtu contract size

  • one cent move equals $100

  • trades all months

  • Natural gas futures symbol (NG)

 

Learn more about the fundamental, technical and seasonal analysis for the natural gas market.

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The natural gas futures contract trades in units of 10,000 million British thermal units (mmBtu). The natural gas futures price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region's prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border. Many savvy end users of natural gas use natural gas futures and natural gas options to hedge their price risks related to higher prices. Contact us for more information about natural gas hedging strategies using natural gas futures and natural gas future options.

During the September 11 terrorist attacks the NYMEX was destroyed but within days the natural gas futures and natural gas options markets were trading again. This is a testament to the strength and viability of the energy future markets. The natural gas futures markets are a perfect example of the pure bastion of capitalism that the futures markets represent.

There are many corporate uses for natural gas futures. The spread between the natural gas future contract and electricity future contract– the spark spread – is another natural gas hedging procedure used to manage natural gas futures price risk in the power markets and utility plants. Natural gas is much more clean burning that products created from crude oil such as heating oil and unleaded gas making its use much better for the environment.

 

Because of the volatility of natural gas future prices, a vigorous basis market has developed in the pricing relationships between Henry Hub and other important natural gas market centers in the continental United States and Canada. The Exchange makes available for trading a series of basis swap futures contracts that are quoted as price differentials between approximately 30 natural gas futures pricing points and Henry Hub. The basis contracts trade in units of 2,500 mmBtu on the NYMEX ClearPortsm trading platform. Transactions can also be consummated off-Exchange and submitted to the Exchange for clearing via the NYMEX ClearPortsm clearing website as an exchange of natural gas future contracts for physicals or exchange of futures for swaps transaction. Learn More >>>

 

natural gas rig futures and options

 

*Contract information changes from time to time. Please click here to see the most recent contract specifications and click here for the most recent trading hours.

 

Contract Specifications

Henry Hub Natural Gas Future and Natural Gas Option Contract

Trading Unit
Futures: 10,000 million British thermal units (mmBtu).
Options: One NYMEX Division natural gas future contract.

Price Quotation
Natural Gas Futures and Options: Dollars and cents per mmBtu, for example, $2.850 per mmBtu.

Trading Hours
Natural Gas Futures and Options: Open outcry trading is conducted from 9:00 A.M. until 2:30 P.M.
After hours natural gas future trading is conducted via the GLOBEX internet-based trading platform beginning at 3:15 P.M. on Mondays through Thursdays and concluding at 9:30 A.M. the following day. On Sundays, the session begins at 7:00 P.M. All times are New York time.

Trading Months
Natural Gas Futures: 72 consecutive months commencing with the next calendar month (for example, on January 2, 2002, trading occurs in all months from February 2002 through January 2008).

Options: 12 consecutive months, plus contracts initially listed 15, 18, 21, 24, 27, 30, 33, 36, 39, 42, 45, 48, 51, 54, 57, 60, 63, 66, 69, and 72 months out on a March, June, September, December cycle.

Minimum Price Fluctuation
Natural Gas Futures and Options: $0.001 (0.1˘) per mmBtu ($10.00 per contract) Therefore a $1 move up or down is equal to $10,000 per natural gas futures contract.

Maximum Daily Price Fluctuation
Natural Gas Futures: $3.00 per mmBtu ($30,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes.

Natural Gas Options: No price limits.

Last Trading Day
Natural Gas Futures: Trading terminates three business days prior to the first calendar day of the delivery month.

Natural Gas options: Trading terminates at the close of business on the business day immediately preceding the expiration of the underlying natural gas futures contract.

Exercise of Options
By a clearing member to the Exchange clearinghouse not later than 5:30 P.M. or 45 minutes after the underlying natural gas future settlement price is posted, whichever is later, on any day up to and including the natural gas options expiration.

Option Strike Prices
Twenty strike prices in increments of $0.05 (5˘) per mmBtu above and below the at-the-money strike price in all months, plus an additional 20 strike prices in increments of $0.05 per mmBtu above the at-the-money price will be offered in the first three nearby months, and the next 10 strike prices in increments of $0.25 (25˘) per mmBtu above the highest and below the lowest existing strike prices in all months for a total of at least 81 strike prices in the first three nearby months and a total of at least 61 strike prices for four months and beyond. The at-the-money strike price is nearest to the previous day's close of the underlying natural gas future contract. Strike price boundaries are adjusted according to natural gas futures price movements.

Trading Symbols
Futures: NG

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To learn more about the energy futures visit unleaded gas futures, crude oil futures and heating oil futures.

To visit weekly commentary click natural gas futures.

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The information presented in this commodity futures and options site is not investment advice and is for informational purposes only. This information can be considered a solicitation to enter into a derivatives trade.Investments in commodity futures and options involves a high degree of risk, your investment may fall as well as rise, you may lose all your original investment and you may also have to pay more than the original amount invested. Past or simulated performance is not a guide to future performance. Futures Trading is not suitable for everyone. This site provides information on online commodity trading, online future trading, commodity future online trading, commodity options, futures trading commodity brokerage.