For the fourth morning in a row, gas futures spiked higher onlyto come crashing down as long traders liquidated their positions inan effort to avoid margin calls on their positions. Includingyesterday’s margin hike, the exchange has raised margins on fivedifferent occasions in the past three weeks, resulting in anincrease for its customers from $5,670 (on Nov. 17) to $13,500.

After reaching its daily highs at 11:45 a.m., 9:45 a.m. and 9:30a.m. (EST) during the regular trading sessions Monday throughWednesday, the prompt January contract was even faster out of thechute Thursday as it raced to a new commodity high of $9.539 atabout 7:25 a.m. January sifted lower from that point, finishingdown 11.2 cents on the day at $8.373.

A cash trader was quick to point to heavy futures buying bywriters of $9.00 call options who were forced to cover theirpositions by buying January futures as the market pushed throughthe $8.95 level yesterday morning. Many of those 8,600 calls werewritten by people that never dreamed a $9.00 call would be “in themoney.” Yesterday, that became a reality and they had to cover themin a market almost devoid of sellers, he continued.

While some traders could see the buying surge that took pricesto new highs coming, few were prepared when trading was halted asthe market tried to pass beneath unchanged.

According to a Nymex spokesperson, trading was halted for anhour Thursday starting at 10:30 in accordance with Nymex rules thatset limits on price moves in trending markets. On Monday, tradingwas halted for an hour when prices in the prompt January contracttraded 75 cents higher than the previous session’s settlementprice.

However, no sooner had the rule been invoked yesterday thanNymex was striving to change it. Effective at 9:30 this morning,Nymex will expand the limits of its natural gas futures contractsto $1.00 across all trading months, abbreviate the trading halt to15 minutes and expand the new limits to $2.00 in either directionof the previous days move once the initial limit is reached.Previously, the market was halted for one hour if the price in oneof the first two months traded $0.750 above or below the previousday’s settlement for five minutes. When the market reopened, thoselimits are extended to all months, but were moved to surround theprevious limit in place in the direction of the move. It was thistrending rule that halted the market yesterday.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.