Platinum margin requirements history on the NYMEX

Review a full list of the changes to Tier 1 platinum margin requirements for NYMEX platinum futures contracts since 2009.

The Comex is owned and operated by the CME Group, which acquired the NYMEX in 2008. The CME Group sets platinum margin requirements based on volatility in the futures market. The more frothy the markets, the higher the CME sets margin requirements. Here’s a full list of the changes to Tier 1 platinum margin requirements for NYMEX platinum futures contracts since 2009:

Jan. 12, 2009

Initial: $3,025
Maintenance: $2,750

April 15, 2009

Initial: $6,600
Maintenance: $6,000

June 26, 2009

Initial: $4,950
Maintenance: $4,500

June 29, 2009

Initial: $1,100
Maintenance: $1,000

April 30, 2010

Initial: $3,850
Maintenance: $3,500

June 7, 2010

Initial: $5,500
Maintenance: $5,000

Sept. 2, 2010

Initial: $4,125
Maintenance: $3,750

Nov. 16, 2010

Initial: $4,950
Maintenance: $4,500

May 31, 2011

Initial: $3,850
Maintenance: $3,500

Oct. 4, 2011

Initial: $4,950
Maintenance: $4,500

Feb. 13, 2012

Initial: $3,850
Maintenance: $3,500

Source.

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How to invest in natural gas

One of the few commodities that has yet to benefit from rising inflation is natural gas. A lot of investors think that’s going to change soon, and here are some ways you can invest in natural gas.

One of the few commodities that hasn’t benefited from rising inflation is natural gas. Part of the reason is because it’s so plentiful. Indeed, some energy experts believe we have enough domestic natural gas in the ground to supply America’s energy needs for the next 100 years.

As I wrote recently in a post titled Natural gas prices on verge of breaking out?, it appears the market’s betting on the commodity as a key piece of the energy puzzle moving forward. The time to invest is BEFORE a major move in the natural gas market, and here’s a handful of ways you can do that:

1) Natural gas ETFs. The safest and easiest way to invest in natural gas is via an exchange-traded fund (ETF). ETFs trade just like stocks, but rather than investing in a specific company, they invest in an underlying commodity, currency, asset or derivative. In the case of natural gas ETFs, there are two dominant players: United States Natural Gas Fund, LP (NYSE:UNG) and First Trust ISE Revere Natural Gas ETF (NYSE:FCG).

UNG and FCG take two entirely different approaches. UNG, which is the most-traded natural gas ETF, invests in futures contracts for the commodity. Betting on UNG is a bet that the market price for natural gas is going to go up in the near-term. FCG, on the other hand, invests in a basket of natural gas stocks. A bet on FCG isn’t much different than buying stock in several different natural gas producers. By spreading your bet across several different natural gas companies, though, you limit the risk that you might pick a dud.

Check out my post on the Top 5 best natural gas ETFs for more.

2) Natural gas stocks. Should natural gas prices start to rise, so too will the fortunes of natural gas producers. Picking winning stocks in the sector could yield better returns than investing in a diversified ETF. Here’s a short list of some of my favorite natural gas stocks and their performance year-to-date:

  • Petrohawk Energy Corporation (NYSE:HK), YTD: +33%
  • Stone Energy Corporation (NYSE:SGY), YTD: +31%
  • Chesapeake Energy Corporation (NYSE:CHK), YTD: +17%
  • EnCana Corporation (NYSE:ECA), YTD: +13%
  • EXCO Resources, Inc. (NYSE:XCO), YTD: +5%
  • Questar Corporation (NYSE:STR), YTD: -2% (yields 3.5%)

Keep in mind that natural gas companies aren’t all equal. As with any industry, natural gas companies could be involved in some or all of the production chain: from exploration to production, transportation, storage or even companies that supply parts or technology to larger natural gas companies. Do your research and know what part of the supply chain you’d like to invest in before you pick your stock. Large, diversified multinational gas producers will likely be the safest stocks, but they probably won’t yield as large a return as a small natural gas exploration company with a track record of uncovering fresh deposits.

3) Natural gas futures. Sophisticated investors can dip their toes into commodities exchanges like the NYMEX in order to invest directly in natural gas. You’ll need quite a bit of capital to get started and a high risk tolerance as natural gas can be volatile. NYMEX futures contracts trade in increments of 10,000 million British thermal units (mmBtu).

When you buy a natural gas futures contract, you’re agreeing to purchase 10,000 mmBtu at a fixed price at the time of the contract’s expiration, which could range from next month to six years in the future. Most commodities traders roll their contracts into new contracts or sell them outright before they reach expiration date. E-mini Natural Gas futures contracts are also available on the NYMEX. Mini contracts are a quarter of the size of a standard contract (2,500 mmBtu).

4) Natural gas mutual funds. Fidelity offers a natural gas mutual fund called the Select Natural Gas Portfolio (Ticker: FSNGX). The fund invests predominantly in the common stocks of natural gas producers, refineries, and distributors. The minimum initial investment in the fund is $2,500 and your returns will be subject to expenses and fees. Plan to keep your money in the fund for at least 30 days, or you’ll be subject to a short-term redemption fee of 0.75%.

5) Cars of the future? The automotive industry has started experimenting with natural gas vehicles (NGVs), and Honda Motor Co. (NYSE:HMC) has made a big bet on natural gas. In fact, Honda’s the only company that’s currently selling NGVs in showrooms in the U.S. You can walk away with a 2011 Honda Civic GX, which is powered by compressed natural gas (CNG), for a starting price of $25,490. If NGVs catch on, Honda stock should be a big beneficiary. If NGVs falter, fear not, as Honda’s diversified into hybrids, hydrogen-powered cars and electric vehicles as well.

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Why does the CME Group raise silver margin requirements?

When investors buy a silver futures contract on the NYMEX, they’re doing it with substantial credit (also known as “margin”) that’s funded by the CME Group. When volatility spikes, something’s got to give.

One of the most interesting storylines in the collapse of silver prices this week comes from the small confines of the silver futures market. Here’s the question: did the dramatic hikes in silver margin requirements by the CME Group lead to or worsen the fall in silver prices?

To answer that chicken-and-egg question, we’ve got to understand why the CME Group adjusts silver margin requirements in the first place. To put it bluntly: they do it to protect their own interests. Any sign of froth or increased volatility in the silver futures market potentially exposes the CME Group to losses.

When investors buy a silver futures contract on the NYMEX, they’re doing it with substantial credit (also known as “margin”) that’s funded by the CME Group. When volatility spikes, the CME Group takes on more risk since rapid price changes could lead to dramatic losses for their clients. If the losses are too large, investors may not be able to pay back the money they borrowed from the CME Group.

Since the start of the year, we’ve watched silver prices surge from $30 to nearly $50 an ounce. During that time, the CME Group has been forced to raise margin requirements on the NYMEX 5 times. Last week, margin hikes and announcements of upcoming hikes got particularly aggressive. Initial rates went from $14,513 to $16,200 on May 2, and they’ll climb again to $21,600 at the close of business on May 9. To put that in perspective, it cost less than $5,000 a year ago to buy a silver futures contract controlling 5,000 ounces of silver.

Of course, it makes sense that the higher the price of silver, the more it should cost to buy rights to 5,000 ounces of the metal. What’s got a lot of investors upset, though, is the pace and scope of the increases. Apparently, the CME Group felt the need to explain itself, too. Kim Tyler, president of CME Clearing, went on the record with the Wall Street Journal arguing that the new margin requirements had little or nothing to do with the change in silver prices.

“We try to make changes in a way that we can telegraph to the market, so that participants have notice. We try to be routine and predictable and provide no surprises,” she told the paper. However, that “notice” has frequently been as short as 24 hours, giving investors little time to re-balance their portfolios. That generally forces the weaker positions out of the market. And when volatility is high, that selling could lead other investors to jump ship, too.

The margin hikes by the CME Group may be getting unfairly maligned, though. It’s clear the NYMEX needs to protect its interests, too. And there’s an ever-growing array of paper investments in the silver market (i.e. ETFs) that make prices in the small silver market more volatile than they otherwise would be. We can’t know for sure that the CME’s changes provided the spark that set off the silver powder keg, but once the ball got rolling downhill, there was little the CME could have done (or avoided) to stop the plunge in prices.

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Things looking up for SPDR Gold Trust (NYSE:GLD)?

A mid-day pop in the SPDR Gold Trust (NYSE:GLD) could have been pointing to a good day today.

After the close of the New York NYMEX last night, the price of spot gold started a slow climb that might have been hinted at in yesterday’s mid-day pop in gold prices. The pop is evident in this five-day SPDR Gold Trust (NYSE:GLD) chart:

The jump in pricing occurred around the time the June retail sales numbers came in. The news was bad, of course, with a 0.5% decline. Negative sentiment in Asia seemed to be pushing gold prices higher.

“I’m bullish for gold, with the metal seen attempting to rise as far as $1,240 in the coming week,” Hong Kong’s director of Asia commodities Wallace Ng told Bloomberg Business Week. “Still, a major breakout to another record may be difficult for the present.”

Around 11:30 p.m. last night, the metal was trading at $1,211 up from an intraday NYMEX low below $1,205. A bevy of bad economic news may put further upward pressure on gold prices. The central tendency growth forecast was lowered to a range of 3 percent to 3.5 percent, U.S. industrial production will post a drop and China’s GDP is showing signs of slowing as the government there tries to rein in growth.

All that paints a gloomy picture for stocks and a rosy one for gold. If the stimulus isn’t working, after all, we’ll likely see a bit of deflation before governments are forced to inflate currencies in a malingering economic environment.