If we look at the market today we can see that there are few markets for Q4 and October or November. Therefore if you were to ask your supplier as to what price you could get in these markets, the quotes would be related back to the liquid product in this case Winter 06. So are there bargains to be had, in these months, the answer to this is possibly but it depends upon what has happened in previous years. Last year there was a significant shortfall in gas in November and this caused prices to spike rapidly, this will almost certainly mean that there will be additional risk premia in November to reflect history. In reality though we can see that gas prices and power prices are lower than last year (not least because of emissions prices) but also there is predicted to be significantly more gas coming into the UK, and this has been seen in the small reduction in gas prices in comparison to last year.

So assuming that the risk premias are priced in but are unlikely to prevail is now a good time to trade? Probably not, most players will have wanted to go long and so they will have bought through out the year almost predicting another November spike. It is unlikely that the November spike will happen again as physical players learn from their mistakes, we therefore see prices fall towards the end of August and September as the market realises that the most people are long. When the prompt is high and the market sees the effects of the squeeze they are more likely to hold their length or even consolidate on it.

Therefore the best course of action is to set a high risk limit, and wait for the market to fall in the next 2-3 weeks.