Quote from scriabinop23:
1-3 yrs holding UNG? Have you ever heard of contango? I believe nat gas will be at 8-10 within a year or two as well, but UNG will still find a way to get slaughtered. If you believe in nat gas, buy some nat gas producers. UNG is a 1-3 month trading vehicle.
I mean, look at the curve. Jan10 is 6.09. That means nat gas can do nothing between now and then, and at BEST you are at breakeven on the UNG and the gas price is 50% higher.
to tell you the truth, i don't know THAT much about UNG but from the research i have done on it, the rollover of the underlying contracts to the next expiration only moves the spread by a very small %.
if you look at the price of UNG commensurate to the futures, they have stayed fairly tight. from Jan.2, 2008 to the peak on July 2nd, NG contracts rose from 7572 to a high of 13694 or 80% whilst UNG moved from 37.16 to 63.48 or 71% in the same period. since then, UNG's drop to the low of 12.73 on 4-27 or 80% and NG to 3155 or 77% kind of shows a good correlation between the prices of the two, no?
i am just trying to figure out where you come up with the logic behind your statement that if NG is up by 50% then UNG is even, at best?
also, is it possible that Jan.'s price of $6 is actually counting on a slight economic recovery and increased demand thus higher prices? i mean, if it is a GIVEN that the price can only come down from $6, then you should short the hell out of it, no?
truly, i rarely trade commodity futures or the ETFs composed of them so i am way opened to learn, especially if it can make me a buck or two.
thanks a lot and good luck trading whatever you trade
