We all know summer will come, but in the meantime, the amount of working natural gas underground storage (short-term storage) continues to decline and is significantly below the year-ago and the five-year average. Overall, natural gas storage reserves are 32% below last year's levels. This becomes even more compelling when you consider that the overall supply and production this year are above 2012 levels. If you understand supply and demand curves, you realize that prices can remain higher than normal as long as either supply is reduced or demand is higher than normal.
One example that I am currently reviewing is to sell a bearish credit spread. A bearish credit spread allows me to capture time decay while I maintain control over my risk, regardless of potential geopolitical events. I can sell a July $22 call option for about $1.90 and buy a July $26 call for about 45 cents for a net credit of $1.55. Because UNG was trading for about $23 a share as I typed this, if UNG remains unchanged at the time of expiration, I make a profit of about 55 cents, because the call is currently in the money. If UNG falls below $22, as I believe it will, I can make a total of $1.55, and if everything that can go wrong does, the most I can lose is $2.45. I like the idea that the market has to move significantly against me before I will start to lose money in the trade. At the time of the publication, the author did not hold any positions in stocks mentioned. Follow @RobertWeinstein This article was written by an independent contributor, separate from TheStreet's regular news coverage.