To most of the traders, we want liquidity. Since NG is the most liquid, most of us trade trade NG market. I do not hold them to expiry. Mostly close out days before that. Or roll over to next month. So the NG/HP/HH do not make any difference to me. I used to work for energy company. We do not care about NG/HP/HH. But we do not like the slippage of HP/HH. They are similar, not the same. We also used OTC contacts due to the large volume. But some trading desks of energy firms can arbitrage the physical vs paper contracts to their advantage. We can trade to the very last day and most of the financial firms can't do it. They will have to pay us to take over their NG contracts since they do not physical gas to deliver or take delivery.
Yes, I'm trading LN options till their expiration. Why not to do it? It's cash settled contracts. Usually if options deep in-the-money, i'm using futures (HP futures) to offset them. Then clearing will expire my positions and send financial result (there will be 0 futures and 0 options).
That's fine, but with Nat. Gas options I have 2 choices: 1) trade not so liquid ON options, that expire into NG futures, so I can close ITM options with very liquid NG futures. or 2) trade much more liquid LN european options. But I can't close them by buying or selling NG futures (or I should do a tricky thing with closing NG futures at 14:30 est when options expire). So I'm using HP futures, that expire the same day the same 14:30 est time together with LN options. Yes, probably I can lose 1 tick due to low liquidity in HP contract, but it's much more safe than jumping out of futures manually.
Also remember that, there is a huge market of NG spread trading. I believe that market is even larger than outright directional trading. We trade NG only. We want all the liquidity we can get. We fight for each tick since we also have to pay two trading commissions for the single spread. NG is the only market we can get it done....
Yes, of course, it's interesting market. Although I haven't free 'buying power' to do smth here now, may be after winter look at it. I'm a little impressed with trading spread till expiration, for example how Nov'21 future jumped to the price of Dec'21 in last day, but I think no one broker allow to trade me till last minute of NG life
Remember NG and CL are physical market. The last two days of trading is all trading logistics since most market participants are out of the market already. Whoever has adverse positions into the last two trading days are at the mercy of the "power" traders. It is all on who controls the market at the last days. If someone does not have the physical gas to cover 10 NG contracts, he will pay any price, even at $7.00 for it. There is no choice.