How to Trade Natural Gas Futures & Options

The Details:

Trading futures & options.

To start trading Natural Gas futures & options, you will first need to open a futures trading account…

Once you’ve opened an account, you will have access to our trading platform (you may also phone your orders in to our 24 hours trade desk).

All futures & options contracts have symbols which are used to identify the contracts you wish to trade. For Natural Gas, the root symbols are…

Futures: NG

Options: ON

As these are ‘futures’ contracts, there will be contracts available to trade with different months & years.  Many traders will choose to trade the most active month, also known as the “front” month, as this will typically be the contract with the most trading volume.

When placing an order, you will identify the exact contract you wish to trade by appending the month and year codes to the root symbol. For example, if you wish to trade an August 2024 Natural Gas futures contract, the full symbol will be: NG.Q24

In this example, NG is the root symbol (a period is then inserted), Q is the month code for August and 24 is the last two digits of the contract year. A period is always used between the root symbol and the month/year code when trading with our InsigniaTrader platform.

Trade Entry:

When trading futures and options, you can either go long (buy) if you think prices will rise or go short (sell) if you think prices will drop.

To enter a futures contract trade, we will enter the following information into the trading platform.

• Number of contracts to be traded
• Trade direction – Buy or Sell
• Exact contract symbol – i.e. NG.Q24
• Order Type: Market, Limit or Stop
• Order Price (if Limit or Stop order)
• Order Duration: Day (current trading session) or GTC (Good Till Canceled)

Once your order has been entered, our trading platform will give you a ticket number for the order as well as a notification when the order gets filled. If/when the order is executed, you will then have either a long or short position depending on the Trade Direction you chose.  You can modify or cancel any working order prior to it being filled or expiring. 

Determining Profit or Loss:

The Natural Gas futures contract trades in 0.001 point increments. As each contract is equal to 10,000 MMBtu, a 0.001 point move equates to $10.00 (0.001 x 10,000). If Natural Gas prices were to move up or down 0.050 points, that would equate to $500.00 +/-.

For this example, let’s assume you went long (bought) one (1) Natural Gas futures contract at a price of 1.917. If Natural Gas futures prices were to rise to 1.965, that would be a 0.048 point gain or $480 (0.048 x 10,000). Conversely, if Natural Gas prices dropped to 1.865, that would be a 0.052 point loss or $520 (0.052 x 10,000).

Please note, when calculating profits or losses, you must also take into account commissions and associated trade fees to determine your net profit or loss.

Margin Requirements:
How much money do I need to trade?

When trading commodity futures contracts, the futures exchanges will set what are called Margin Requirements for each commodity. Margins in futures trading is NOT similar to margins in stock/equity trading. Think of margin requirements as a performance bond. The dollar amount you must have available in your account in order to trade one particular commodity futures contract. To view the current, initial margin requirements for Natural Gas (or any other major futures contract), please visit our Margin Requirements web page. You’ll find the margin requirement for this contract under the ‘Energies’ section of the table.

Our Futures Margins Requirements web page will show all of the current margin requirements needed for trading one contract – either for position trading or Day-Trading. The Initial margin requirements are for position trading. Position trading refers to holding a futures contract for longer than one day (trading session).

We also offer our Ultra-Low Day-Trade margins. Day-Trade margins are typically set much lower than the initial margin requirement and allow futures traders to participate in a given futures contract just for the currents day’s trading session with less funds. When Day-Trading, you must liquidate all open positions by the close of the current trading session or have the available funds in your account for the full, initial margin requirement to avoid a margin call.

*Please Note: Margin requirements are subject to change without notice from the futures exchanges.

If you still have questions, feel free to contact us by phone, chat or information request form. We will be happy to assist you.