Andrew Mickey, writing for the International Business Times, thinks he has the answer. In an article dated today, he gives his advice as a matter of relativity. Andrew dives into the skewed relationships that are created in highly volatile markets. His theory, look at those skewed relationships, such as the historical relationship of gold to gold miners, and gold to silver. He finds that there is a historical normal relationship, that, when out of normal, can be exploited as the relationship trends back to normal.

As a website devoted to ETF news, we focused on his recommendations on Shorting oil. Why? Because he uses ETF’s to achieve his strategy. Adam compared Natural Gas to Oil, through his analysis he found, ” the Oil/Natural Gas ratio has averaged about 11. Which means a barrel of oil was worth the same as 11 Mcf of natural gas. But when the markets started going haywire, so did the relationship between oil and natural gas.

Last summer when oil spiked to $147 a barrel, natural gas didn’t go along for the ride. The ratio soared to 16. When oil prices collapsed, natural gas prices fell. But they didn’t fall as fast as oil prices. As a result, the ratio fell to a rock bottom level of 6.”

At the date of the article, the ratio stood at 16.8, above his average of 11. Because of this skewed relationship, he advises the purchase of a short oil etf specifically U.S. Oil Fund ETF (USO), and a straight buy of natural gas specifically U.S. Natural Gas Fund (UNG).  Using this theory, Adam feels you could profit around 35% after the ratio returns to 11.

Although the theory is an interesting one, we would definitely recommend our readers to do your homework before doing anything. Anyone who frequents our content will know there is a considerable amount of questions associated with UNG right now (see related articles), so details on any trade are crucial.

For Andrew’s full story click: HERE

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