Feeding off strength from Wednesday’s minor advance, the futuresmarket seemed to pick up momentum yesterday. A stronger open gainedapproval from eager bulls, who bid the contract steadily upwardThursday morning. Then after an early afternoon sell-off wasthwarted, prices again pressed higher, but this time buying camefrom all market segments as locals, trade, and paper players joinedthe rally. The April contract finished up 7.6 cents at $1.835.

After all the dust settled yesterday, there was still onequestion unanswered. Why after prices had trended within a fairlytight range for almost two weeks had they spiked higher amid lightphysical demand and nothing ominous on the horizon? A Midcontinentmarketer was at a loss to explain the dramatic rise, offering onlythat “technicals must have been at work.” Another marketer wasquick to point to cash prices, which moved higher in manylocations, as a reason for the advance.

However, a Houston trader disagreed on both counts, explainingthat it was the options market that was to blame for the strength.He pointed to a considerable number of in-the-money or almostin-the-money calls-6,700 at $1.80 and 6,300 at $1.85-which causedthe writers of those options to step into the futures marketThursday in order to cover their obligations. “Normally, optionwriters have the luxury of playing the Access market after optionsexpire to cover the physical obligation of option in-the-moneycalls. However because options expire [Friday] when there is noAccess trading, they will be forced to do their buying ahead of theclose.”

But how big of an impact could the outstanding calls have? “Thisis a major league market mover. About 13,000 calls equates toroughly 4.3 Bcf a day over the entire month of April,” hecalculated. Looking ahead, he believes the April contract willpress higher today, before it gets “the air let out again onMonday, and prices snap back to $1.75.”

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