Home > Getting In On The Bottom With Natural Gas ETFs (UNG, UNL, GAZ, FCG, IEZ, WCAT)
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Getting In On The Bottom With Natural Gas ETFs (UNG, UNL, GAZ, FCG, IEZ, WCAT)

April 21st, 2010

“You probably already know there’s a phenomenal investment opportunity in natural gas right now. But here’s the background… Natural gas is an extremely useful fuel. In 500 BC, the Chinese used natural gas to turn seawater into drinking water. In Victorian England, they used it to power streetlights. When I traveled around Asia back in August 2008, I found them using natural gas to fuel taxis. And in Canada, they run their buses on natural gas. In America, we mainly use gas for heating our homes, generating electricity, and for running our factories and other industrial processes like pulp and paper manufacturing,” Tom Dyson Reports From Money Week.

Dyson goes on to say, “In total, natural gas accounts for about 23% of the total energy used in America. And not only is it extremely useful, but it’s the cleanest of all fossil fuels. According to the Energy Information Administration (EIA), at the same energy level, natural gas produces 29% less carbon dioxide than oil and 44% less carbon dioxide than coal. Burning natural gas also produces far less sulphur dioxide, nitrogen oxides, mercury, and particulates. This is important to the world’s bureaucrats, who are on a mission to reduce the amount of carbon dioxide and other pollutants we release into the atmosphere.”

“And America is loaded with natural gas. It’s the second-largest producer of natural gas in the world after Russia, and may have the world’s largest reserves. This makes natural gas attractive from a strategic perspective, as we control the supply. It also makes it popular with the politicians. The more natural gas we use, the more American jobs the government can claim it has created. Over the last 18 months, natural gas has fallen over 70% in price and is now close to its lows of the last eight years. While natural gas prices are still at 2002 levels, crude oil prices have tripled. So natural gas also looks extremely cheap when compared to its most important competitor,” Dyson Reports.

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So whats the best way to play the natural gas commodity?  ETFs offer an easy way to play Natural Gas and there are many options available besides the most popular US Natural Gas ETF (NYSE: UNG).  We have listed some options for investors to look at and compare to one another below.  Note that we have listed some industry related ETFs as well as direct Natural Gas exposure plays excluding any leveraged ETFs.

United States Natural Gas Fund (NYSE: UNG)

The United States Natural Gas Fund, LP (“UNG”) is a new way for investors and hedgers to manage their exposure to energy. The United States Natural Gas Fund LP (NYSE: UNG) is an exchange traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues units that may be purchased and sold on the NYSE Arca. The investment objective of UNG is for the changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas traded on the New York Mercantile Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire, less UNG’s expenses.

Chart for United States Natural Gas (UNG)

United States 12 Month Natural Gas (NYSE: UNL)

The investment seeks to reflect the changes, net of expenses, of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the average of the prices of 12 futures contracts on natural gas traded on the NYMEX. The fund will consist of the near month contact to expire and the contracts for the following eleven months, for a total of 12 consecutive months contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contract that is the next month contract to expire and the contracts for the following eleven consecutive months.

Chart for United States 12 Month Natural Gas (UNL)
iPath DJ-UBS Natural Gas TR Sub-Idx ETN (NYSE: GAZ)

The investment seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note is designed to reflect the performance of natural gas. The index is composed of the Henry Hub Natural Gas futures contract traded on the New York Mercantile Exchange.

Chart for iPath DJ-UBS Natural Gas TR Sub-Idx ETN (GAZ)

First Trust ISE-Revere Natural Gas Idx (NYSE: FCG)

The investment seeks to replicate, net of expenses, the ISE-REVERE Natural Gas index. The fund invests at least 90% of assets in common stocks that comprise the index. The index is an equal-weighted index that consists of exchange-listed companies that derive a substantial portion of their revenue from the exploration and production of natural gas. The fund is nondiversified.

Chart for First Trust ISE-Revere Natural Gas Idx (FCG)

iShares Dow Jones US Oil Equipment Index (NYSE: IEZ)

The investment seeks results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Oil Equipment & Services index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in the Underlying index but which BGFA believes will help the fund track Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. It is nondiversified.

Chart for iShares Dow Jones US Oil Equipment Index (IEZ)

Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF (NYSE: WCAT)

The investment seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters/Jefferies CRB Wildcatters Energy E&P Equity index. The fund normally invests at least 80% of total assets in the equity securities that comprise the underlying index and depositary receipts based on the securities in index. The index is designed to track the overall performance of a universe of listed U.S. and Canadian small and mid-capitalization companies engaged in the exploration and production of oil and natural gas. The fund is nondiversified.

Chart for Jefferies TR/J CRB Wildcatters Exp&Pr Eq (WCAT)


NYSE:FCG, NYSE:GAZ, NYSE:IEZ, NYSE:UNG, NYSE:UNL, NYSE:WCAT


 

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