While many believe in the long term future of natural gas as an energy source, it will remain a volatile commodity in the short run until export facilities come online starting in 2015. Natural gas demand has been highly cyclical depending on the weather, economic growth and power consumption. Supplies on the other hand have exploded on the back of the shale revolution in the U.S. far outpacing demand. Exporting some of the glut to higher-priced markets in Europe and Asia would certainly align demand with supply unless the government caps how much can be exported. Until then, price volatility is expected to reign around decade low levels to a trader’s hearts content. For natural gas investors seeking twice the exposure to daily price movements there are 2 ETFs that will provide you with double the performance, long and short, of natural gas futures contracts.
ProShares Ultra Dow Jones-UBS Natural Gas 2x ETF (NYSE: BOIL)
Error opening: http://finance.yahoo.com/d/quotes.csv?s=BOIL&f=sl1c1j1ya2
BOIL ETF seeks a return that is 2x the performance of the Dow Jones-UBS Natural Gas Subindex for a single day, net of expenses. The Subindex is composed of NYMEX traded natural gas futures contracts that are rolled on a monthly basis. BOIL is simply a double long ETF providing you with 200% leverage to NG futures. The fund was launched in October of 2011.
Live ONE YEAR Chart of the Ultra Dow Jones-UBS Natural Gas 2x ETF– Symbol BOIL
ProShares UltraShort Dow Jones-UBS Natural Gas 2x ETF (NYSE: KOLD)
Error opening: http://finance.yahoo.com/d/quotes.csv?s=KOLD&f=sl1c1j1ya2
KOLD ETF seeks a return that is 2x the inverse (opposite) of the performance of the Dow Jones-UBS Natural Gas Subindex for a single day, net of expenses. The Subindex is composed of NYMEX traded natural gas futures contracts that are rolled on a monthly basis. KOLD is simply a double short ETF providing you with 200% opposite leverage (-2x) to NG futures. For an example, if natural gas price falls 5% during a day, KOLD will rise 10% during that same day. The fund was launched in October of 2011.
Live 5 DAY Chart of the UltraShort Dow Jones-UBS Natural Gas 2x ETF– Symbol KOLD
United States Natural Gas Double Inverse ETF (NYSE: UNGD)
Error opening: http://finance.yahoo.com/d/quotes.csv?s=UNGD&f=sl1c1j1ya2
UNGD is an upcoming double short ETF providing investors with 2x the opposite daily percentage change in the price of NYMEX traded natural gas futures contracts. UNGD’s parent is the same company (U.S. Commodity Funds) that brought the popular USO oil ETF. The paperwork has been filed and a launch date has yet to be determined.
BOIL and KOLD are leveraged ETFs that are not for the faint of heart. They are not designed for long term buy and hold investors (1 Year BOIL Live Chart above shows buy and hold investors have been burned) but for nimble active traders that enter and exit a position within a single trading session (see 5 day LIVE chart above for KOLD trading opportunities). They should be used as part of a short term trading strategy designed to capitalize on natural gas price volatility through quick sharp trades. Keep in mind that with a leveraged natural gas ETF the effect of contango and backwardation is multiplied by 2 but most importantly, remember that trading leveraged ETFs can cost you a lot of money in losses if you don’t know what you’re doing. Keep your stoploss tight and monitor your position constantly!
Disclaimer: the information presented above is only for informative purposes. It is in no way an encouragement to buy or sell the aforementioned securities.