Long term investment of Natural Gas

heispark · Nov 8, 2019

What is the best vehicle for long term investment of natural gas? Futures have roll-over cost and ETF is reset daily and not accurately following actual performance as far as I know. Please share your experience. I think I can safely buy whenever price drops to near $2 with stop loss below $1. Because it has production cost, it actually cannot go down that deep I believe. Looking back history, price recovery is relatively quick.....
Thanks!

Wheezooo · Nov 8, 2019

heispark said:
What is the best vehicle for long term investment of natural gas? Futures have roll-over cost and ETF is reset daily and not accurately following actual performance as far as I know. Please share your experience. I think I can safely buy whenever price drops to near $2 with stop loss below $1. Because it has production cost, it actually cannot go down that deep I believe. Looking back history, price recovery is relatively quick.....
Thanks!

Just buy a long-dated future.

bone · Nov 8, 2019

Motley Fool Top Five Nat Gas Stocks

https://www.fool.com/investing/5-top-natural-gas-stocks-to-buy-now.aspx

Sig · Nov 8, 2019

Wheezooo said:
Just buy a long-dated future.

Depending how long is long there just wasn't any volume there last I checked (I was trying to go out 10 years with exposure every year). I agree with @bone, and would add that you might want to look at the MLPs with gas exposure.

bone · Nov 8, 2019

Sig said:
Depending how long is long there just wasn't any volume there last I checked (I was trying to go out 10 years with exposure every year). I agree with @bone, and would add that you might want to look at the MLPs with gas exposure.

I wouldn't recommend you buying a long dated future (or short dated for that matter) unless your account capitalization is such that you could basically ignore it and not give a flip. You would get a decent market for Dec '20 but the market for Dec '21 is shite.

The ETF UGAZ tracks the NG futures quite closely, and it is by far and away the most liquid of the NG ETF's.

heispark · Nov 8, 2019

bone said:
I wouldn't recommend you buying a long dated future (or short dated for that matter) unless your account capitalization is such that you could basically ignore it and not give a flip. You would get a decent market for Dec '20 but the market for Dec '21 is shite.

The ETF UGAZ tracks the NG futures quite closely, and it is by far and away the most liquid of the NG ETF's.

Why Leveraged ETFs Are Not a Long-Term Bet
https://www.investopedia.com/articl...5/why-leveraged-etfs-are-not-longterm-bet.asp
"If you’re a retail investor and/or a long-term investor, steer clear of leveraged ETFs. Generally designed for short-term (daily) plays on an index or sector, they should be used that way, otherwise, they will eat away at your capital in more ways than one, including fees, rebalancing, and compounding losses."

How a 200% surge in a triple-leveraged natural-gas ETN can be a cautionary tale
https://www.marketwatch.com/story/h...l-gas-etn-can-be-a-cautionary-tale-2018-11-14
“important to remember that the way they are structured makes holding them for any extended period of time a sucker’s bet,”

themickey · Nov 8, 2019

bone said:
....The ETF UGAZ tracks the NG futures quite closely, and it is by far and away the most liquid of the NG ETF's.

For those contemplating, 3 x leveraged so more volatility to be expected.
Currently UGAZ ~ 16% below a MA200 with a mkt cap of $182M while ETF 'UNG' is ~1.5% above MA200 and mkt cap $229M.

bone · Nov 8, 2019

I agree completely - I was offering an alternative for holding a futures contract

themickey said:
For those contemplating, 3 x leveraged so more volatility to be expected.
Currently UGAZ ~ 16% below a MA200 with a mkt cap of $182M while ETF 'UNG' is ~1.5% above MA200 and mkt cap $229M.

heispark said:
Why Leveraged ETFs Are Not a Long-Term Bet
https://www.investopedia.com/articl...5/why-leveraged-etfs-are-not-longterm-bet.asp
"If you’re a retail investor and/or a long-term investor, steer clear of leveraged ETFs. Generally designed for short-term (daily) plays on an index or sector, they should be used that way, otherwise, they will eat away at your capital in more ways than one, including fees, rebalancing, and compounding losses."

How a 200% surge in a triple-leveraged natural-gas ETN can be a cautionary tale
https://www.marketwatch.com/story/h...l-gas-etn-can-be-a-cautionary-tale-2018-11-14
“important to remember that the way they are structured makes holding them for any extended period of time a sucker’s bet,”

Zor_Champ · Nov 9, 2019

heispark said:
Why Leveraged ETFs Are Not a Long-Term Bet

Time for some Mythbusting:
There is a big myth about leveraged ETFs that has been recently propagated in the media. This article corrects the myth and explains the faulty reasoning that gave rise to it.

The myth is:

Leveraged ETFs are not suitable for long term buy and hold
These claims are not backed up with mathematics and data. This article rectifies that deficiency and finds that the claims are false.

http://ddnum.com/articles/leveragedETFs.php

themickey · Nov 9, 2019

Triple leverage creates triple volatility, if one is prepared for that, sounds easy in theory but practically is hard on the nerves for long term buy & hold, hence why most futures traders don't buy & hold.