Natural Gas etf or company without contango

bearmace

bearmace

Since GASZ got pulled off the market, there hasn't been an natural gas etf around that can neutralize contango of each rolled futures contract. I'd like to place a big long position on nat gas til at least Jan of 2017, but can't find the proper instrument to track NG prices. UNG will be affected negatively by 5% contango decay every month, and the 3x ETNs decay too fast for a long term trade as well. Anyone have any ideas?
 
Proxy. Extractors, refiners, exploration, specialty equipment manufacturers, delivery/transportation and storage/holding companies, etc. Do your research. Look at beta of mining and jr. mining companies as compared to the spot of whatever they are mining.
 
If you have a big long you want to initiate, have you thought about putting out a bid on one of the futures contract for 2017? You will still pay a hefty 50% premium and some spreads. You can't buy at current prices for future delivery. It's unavoidable and that's the cost of logistics.
 
bearmace said:
Since GASZ got pulled off the market, there hasn't been an natural gas etf around that can neutralize contango of each rolled futures contract. I'd like to place a big long position on nat gas til at least Jan of 2017, but can't find the proper instrument to track NG prices. UNG will be affected negatively by 5% contango decay every month, and the 3x ETNs decay too fast for a long term trade as well. Anyone have any ideas?
More...
Check out Southwestern Energy (SWN)...this is my long term nat gas play in IRA account. I'm trying (DBO) for long term oil but its underperforming (USO) currently.:(
 
Golden Retriever Trading said:
If you have a big long you want to initiate, have you thought about putting out a bid on one of the futures contract for 2017? You will still pay a hefty 50% premium and some spreads. You can't buy at current prices for future delivery. It's unavoidable and that's the cost of logistics.
More...

The 50% premium IS the cost of logistics.
 
bearmace said:
Since GASZ got pulled off the market, there hasn't been an natural gas etf around that can neutralize contango of each rolled futures contract. I'd like to place a big long position on nat gas til at least Jan of 2017, but can't find the proper instrument to track NG prices. UNG will be affected negatively by 5% contango decay every month, and the 3x ETNs decay too fast for a long term trade as well. Anyone have any ideas?
More...

As I've said before, when you buy a commodity, you are buying two things, the raw material and the cost to store it. There is NO way around that unless you want to buy the raw material yourself and store it in your backyard. Commodities are NOT stocks. You CANNOT simply average down. When you own a stock, your storage cost is your cost of capital or opportunity cost. When you buy oil or natural gas, it's opportunity cost plus the cost of storage. So every ETF whether leveraged or not, has to embed this storage cost in the price which comes from the forward curve.
 
Maverick74 said:
As I've said before, when you buy a commodity, you are buying two things, the raw material and the cost to store it. There is NO way around that unless you want to buy the raw material yourself and store it in your backyard. Commodities are NOT stocks. You CANNOT simply average down. When you own a stock, your storage cost is your cost of capital or opportunity cost. When you buy oil or natural gas, it's opportunity cost plus the cost of storage. So every ETF whether leveraged or not, has to embed this storage cost in the price which comes from the forward curve.
More...
Or to put it another way, if you found a way to avoid storage/logistics cost you'd have a risk free arbitrage situation and it would instantly be arbed away.
 
Sig said:
Or to put it another way, if you found a way to avoid storage/logistics cost you'd have a risk free arbitrage situation and it would instantly be arbed away.
More...

Exactly. You could buy the ETF and sell the future and capture the difference.
 
I've reviewed a lot of proxy companies that might follow nat gas and a lot of them either have fleas like CHK or are also heavy into oil, which I'm not as bullish on. Does anyone know any pure to close to pure nat gas companies whose stock track the /NG prices closely?
 
You must log in or register to reply here.
Back
Top