Natural Gas ETFs Soaring in 2013 - ETF News And Commentary
28 March 2013 - 3:15AM
Zacks
As many investors know, natural gas ETFs like UNG have been
terrible performers over the long haul. These funds aren’t
inherently bad though, they are just troubled by a big slope on the
futures curve.
This situation has led many natural gas ETFs to go down
significantly, as these funds must continually buy up newer
contracts at elevated prices and then resell them closer to
expiration at deflated levels. Basically, with an unfavorable
futures curve, these ETFs are usually ‘buying high and selling
low’.
While this has been a huge problem, it hasn’t really been the
case in 2013 as a number of factors have conspired to push natural
gas higher. Chief among them are a long winter, less supply, and
fewer prospects for more production in the near-term (see The
Comprehensive Guide to Natural Gas ETFs).
These items have helped UNG to surge on the year, pushing the
fund up double digits in the time period. If that wasn’t enough
though, leveraged funds have also been winners in the space with
BOIL adding 30% and UGAZ soaring by over 50% in the time frame.
Just be careful with these products going forward, as even if
the supply situation continues in natural gas’ favor, the space
could be hurt if the futures curve changes. So while natural gas
ETFs may have more room to run, it is by no means a sure thing,
suggesting that traders should take extra caution when looking at
this ever-popular corner of the investing world (read Natural gas
ETFs: Futures vs. Equities).
For more information on natural gas ETFs so far in 2013, watch
our short video on the subject below:
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PPO-ULT DJ-U NG (BOIL): ETF Research Reports
VEL-3X LNG NG (UGAZ): ETF Research Reports
US-NATRL GAS FD (UNG): ETF Research Reports
US-12M NATL GAS (UNL): ETF Research Reports
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