Although natural gas is arguably one of the most frustrating commodities on the market, trading the fossil fuel has surged in popularity in recent years. Natural gas’s inherent volatility combined with its healthy trading volume has made it quite an enticing investment tool for those investors looking for potentially lucrative returns. Natural gas is also known for being “greener” than its other fossil fuel cousins, like coal and oil, since it is relatively cleaner and produces less greenhouse gas emissions. And thanks to the rapid development of the exchange-traded fund industry, investors now have several ways to gain access to one of the most popular commodities [for more natural gas news and analysis subscribe to our free newsletter].
Trading natural gas has long been the dominant way of obtaining exposure to this fossil fuel. While it is possible to establish positions using stocks and ETFs, the most direct and often most liquid options come from futures contracts (or futures-based products). High daily volumes coupled with erratic and sometimes unpredictable movements have given natural gas a big name in the commodity world. While some have gotten burned by NG’s massive slide in recent years, others have been able to profit through puts and other trading strategies. Below, we outline strategies for trading natural gas, the ultra-popular United States Natural Gas Fund (UNG), and more [for more natural gas news subscribe to our free newsletter].
Ever since markets crashed in 2008, investors have been slowly increasing their risk appetites, shifting towards more lucrative and risky asset classes such as commodities. Some investments in this category have flourished, while others haven’t fared so well. Natural gas is perhaps the first cringe-worthy commodity that comes to mind as investors witnessed its unprecedented free fall over the last few years. But with NG and some of the other big losers comes a potential buy in opportunity at rock bottom prices. Whether you’re looking for a bargain or simply want to avoid these bad-performing funds, we outline 3 of the worst performing commodity ETPs over the last three years. Note that this list is a bit modified in that we only chose one fund from each commodity type [see also 12 High-Yielding Commodities For 2012].
Natural gas is one of the more volatile commodities which allows for investors to bring home serious gains, but also serious losses. It has become a trading favorite thanks to its violent price swings and its paradoxical habit of being consistently inconsistent. With weekly supply reports from the EIA as well as constant investor speculation over future energy uses, it is no surprise to see this asset class surge in such high popularity. But with natural gas futures being a bit too complex and dangerous for the average investor, many have turned to the United States Natural Gas Fund LP (UNG) for their exposure to this coveted trading asset [see also Commodity Trading Trends: Crude Oil In Focus].
This article originally appeared on ETFdb.com. Commodity ETPs can be extremely powerful tools for tapping into an asset class capable of providing both return enhancement and diversification benefits. With dozens of products available–there are more than 120 U.S.-listed commodity ETFs according to the ETF screener–picking the right fund for your investment objectives and risk tolerances can be challenging. Beyond the type of commodity included, there can be several attributes of commodity ETPs that shape the risk/return profile; below, we look at five factors to consider when trying to narrow down the universe and find the right commodity ETF (or ETN):
Natural gas is a gas that consists primarily of methane and is widely used as an energy source around the world. The natural resource is important for the creation of fertilizers, and is now used to power a wide variety of applications including automobiles. Supplies of natural gas are concentrated in a few regions of the world, and the fuel has historically been the source of political disputes in Eastern Europe and the Middle East as well as in the U.S. The place of natural gas in the domestic energy equation has been widely discussed in recent years, with many advocating for increased adoption as an alternative to crude oil products [see also The Guide To The Biggest Companies In Every Major Commodity Sector].