Energy Futures: Natural Gas & Crude Oil Trading | Closing the Gap: Futures Edition

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Learn the relationship between Natural Gas and Crude Oil Futures and how to set up a pairs trade that profits from a weakening in their correlation.

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Besides both being in the energy sector, Nat Gas and WTI Crude have minds of their own. In fact, the long term correlation between CL and NG has been 0.

Recently, the two commodities have been trading in step with each other as the market approached historic highs. Even though /CL has been dancing around this price for half a year, Pete notices that it is rare to see /NG down at the same rate.

Most of our pairs trades are placed with the idea of playing a return to correlation, but today, Pete proposes a trade that plays a reversal back to uncorrelated movements. Nat Gas trades seasonally and Crude is always in demand so the guys go long and assume Crude is going to stay the same.

Check out how Pete prices the two and sets up this uncorrelated pairs trade on Closing the Gap: Futures Edition.

The gap between the self-directed and institutional trader in the world of Futures gets closer as Tom and Tony go head-to-head with one of the Futures market industry’s best institutional traders. We bring professional strategies to individual investors.

You can watch a new Closing the Gap: Futures Edition episode live and check out all previous episodes everyday at!

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