Natural gas is one of the most traded commodities in the world. It has a wide range of use from boiling the water on your stove to generating the electricity you use in your home. With recent natural gas discoveries in the Untied States and ExxonMobil recently purchasing XTO Energy, you may want to take a look at natural gas as a possible investment.
There are many ways to invest in natural gas. These range from individual stocks, to mutual funds, to a gas ETF. Finding the right way to trade nat gas will depend on what type of investor are you? Are you a day trader or do you look at the market with a long-term perspective? There is no right or wrong answer; you just have to decide what is your comfort level when it comes to trading.
One of the most popular ways to trade a natural gas ETF is by investing in the United States Natural Gas ETF.
This fund (ticker symbol UNG) trades on the New York Stock Exchange. The UNG ETF is generally comprised of natural gas futures contracts traded on the New York Mercantile Exchange. The goal of the fund is to match the 1-day percentage move (before expenses) on the front natural gas contract traded on NYMEX. This makes the UNG a pure natural gas futures investment.
Now you can certainly go out and trade natural gas futures, but that would mean you would be using leverage and have to open a commodity/futures trading account. If you want to participate in natural gas futures easily, then the UNG ETF may be for you.
The United States Natural Gas Fund is part of the United States Commodity Fund LLC family of energy related ETFs. This fund does not use leverage. That means it will never have to meet a margin call. The fund invests primarily in the front month natural gas futures contract. When there are 2 weeks before expiration of the front contract, the fund then begins to “roll” out of the front contract and into the next month contract. The UNG ETF may at times trade in the ICE exchange and trade swaps and OTC depending on market conditions.
This is a brief background on the United States Natural Gas Fund. Do some more research to see if this is the right way for you to invest into a natural gas ETF.