UNG does not decay. I think there is a lot of confusion here on this thread. Any ETF that replicates a futures product will suffer from contango or benefit from backwardation in the futures roll. You can synthetically replicate this on your own with futures. In the case of natural gas there is a contango which you means you can sell nat gas in a deferred month that is higher then the current price is today. If nat gas goes lower in price, you make money. Then when it's time to roll you get to re-sell nat gas at a higher price and keep repeating the process. You don't need the ETF to do that. Same with USO. It's not a function of decay. You are benefiting from the contango.
*No Risk* - Simply Short UNG, VXX, SDS and every other Constantly Decaying ETF
- Thread starter thesniper
- Start date
UNG does not decay. I think there is a lot of confusion here on this thread. Any ETF that replicates a futures product will suffer from contango or benefit from backwardation in the futures roll. You can synthetically replicate this on your own with futures. In the case of natural gas there is a contango which you means you can sell nat gas in a deferred month that is higher then the current price is today. If nat gas goes lower in price, you make money. Then when it's time to roll you get to re-sell nat gas at a higher price and keep repeating the process. You don't need the ETF to do that. Same with USO. It's not a function of decay. You are benefiting from the contango.
ung is a natural gas tracking etf.
natural gas is trending down all the years. I trade futures. and buy put options in natural gas UNG.
not time decay. new technology drilling makes harvest of natural gas cheap, also new findings of large scale shales sucah PA pittsurgh area, lots of places have large inventory underground, abundant,... that is fundamentals.
normally winter is a good season for shortage, so price goes up. but this year we have a abnormal warm winter, so it goes down to the historical low, and still prints new low.
UNG is a good short sale candidate, particularly winter ends, spring comes, then end shorting at fall.
just like farming cycle.
natural gas is trending down all the years. I trade futures. and buy put options in natural gas UNG.
not time decay. new technology drilling makes harvest of natural gas cheap, also new findings of large scale shales sucah PA pittsurgh area, lots of places have large inventory underground, abundant,... that is fundamentals.
normally winter is a good season for shortage, so price goes up. but this year we have a abnormal warm winter, so it goes down to the historical low, and still prints new low.
UNG is a good short sale candidate, particularly winter ends, spring comes, then end shorting at fall.
just like farming cycle.
Scataphagos
Registered: Apr 2009
Posts: 7608
03-28-12 10:38 AM
Quote from thesniper:
There are so many ETFs out there that seem to be constantly decaying towards zero. UNG, VXX, SDS come to mind immediately but there are like 20+ others. Why even bother trading when you can just short these ETFs and double your money almost every year.
I also wonder how the SEC can approve such ETFs that have zero chance of making anyone any money if they hold it more than a couple of days. These are the riskiest "assets" on the planet right now. I also wonder if there are hedge funds out there that exclusively short these funds.
Sooooo stupid, don't know where to begin.
let's hear a more precise answer for your critique
Registered: Apr 2009
Posts: 7608
03-28-12 10:38 AM
Quote from thesniper:
There are so many ETFs out there that seem to be constantly decaying towards zero. UNG, VXX, SDS come to mind immediately but there are like 20+ others. Why even bother trading when you can just short these ETFs and double your money almost every year.
I also wonder how the SEC can approve such ETFs that have zero chance of making anyone any money if they hold it more than a couple of days. These are the riskiest "assets" on the planet right now. I also wonder if there are hedge funds out there that exclusively short these funds.
Sooooo stupid, don't know where to begin.
let's hear a more precise answer for your critique
It's most likely related to a post I saw on here.
This guy was making good money shorting the Vix as the board market was advancing.... OK
Well S&P tanks and he lose all his profits!
To say there is no risk is just ... DUMB!
As other people have said, other traders have also recognized the decaying nature of certain ETFs and thus those are usually hard to borrow with prohibitive locate costs.
Very high cost to carry. Absolutely.
Did some backtest and winning money by buying ung is really hard, basically it is designed to drop without spark risk.
Spark risk?
VIX spark raise
What the hell is that?