What Are Natural Gas ETFs?
For investors seeking to gain exposure to natural gas through exchange-traded products, there are several options available.
The most popular options in the United States Natural Gas Fund (UNG), which invests in front month futures contracts. This strategy means that UNG will exhibit a high correlation to spot prices over the short term, but may be impacted most significantly by the adverse impacts of contango over the long run.
Another option is the Teucrium Natural Gas Fund (NAGS). This ETF spreads exposure across multiple maturities, and was designed to be more reflective of spot prices over the long term. UNG may be preferable for short-term traders, but NAGS makes sense for those with a longer time horizon.
There is also the United States 12 Month Natural Gas Fund (NAGS), which spreads exposure to futures contracts across 12 separate months. That minimizes the potential for an adverse roll yield, but may diminish correlation to spot natural gas prices.
There is also a natural gas ETN; the iPath Natural Gas ETN (GAZ) is linked to an index comprised of near month futures contracts. But investors should beware of this product, as it has occasionally traded at a premium to its NAV because iPath has suspended creations.
All of the ETPs mentioned above utilize futures contracts to gain exposure to natural gas. There is, however, another ETF that offers exposure to this commodity through equities. The First Trust ISE Revere Natural Gas ETF (FCG) invests in stocks of companies that derive revenue from the exploration and production of natural gas.