Is It Time To Get On Board The Natural Gas ETF? (UNG, FCG, UNL)

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June 14, 2010 10:31pm NYSE:FCG NYSE:UNG

The United States Natural Gas ETF (NYSE:UNG) a favorite commodity play among investors has recently been in the spotlight as the ETF has seen strong upward momentum. The ETF closed up


 4.65% on Monday to finish at $8.55.  As Christoper Lynn From Traders Huddle Reports, “The United States Natural Gas Fund (NYSE:UNG) is probing the $8.50 area, which was the high volume breakout highs earlier this month. The (NYSE:UNG) was able to hold above the $8 area last week, setting what traders consider to be a higher low, which is now being used as a pivot point for the push to re-test resistance. The United States Natural Gas Fund (NYSE:UNG) has been the favorite short for multiple traders during the last year, where every single rally was shorted, as the (NYSE:UNG) continuously made lower lows stuck in contango with the ETF selling the front month at a loss as it rolled over to buy contracts on the next month.”

It what has been the ultimate reversal for the ETF, more bullish sentiment continues to take place as Sy Harding from Forbes reports, “We also like (NYSE:UNG) because it often moves independent of the stock market, a plus in these uncertain times for stocks.  We have an upside target of $16, and suggest a trailing mental protective stop at $6.50. It has now triggered a buy signal on our intermediate-term technical indicators, and has broken out above the resistance at its 20-week m.a. for the first time since it topped out in 2008”

Harding goes on to say, “On the fundamentals, natural gas futures have turned up apparently on forecasts of a hot summer, which is expected to increase demand for natural gas. I believe there’s more to it than that. The disastrous BP oil spill has raised awareness of the risk of offshore drilling, and is likely to create renewed interest in abundant and clean-burning natural gas as an alternative for many uses. Oil tycoon T. Boone Pickens has argued for years that natural gas is the best immediately available economic and environmental solution for U.S. energy needs, a bridge over oil and coal to the future when alternative solar, wind, and nuclear power will be ready to take over more of the load.”

It what has everything going for it Don Dion Reports From The Street Reports, “In addition to the improvement in natural gas prices and the value of assets in the sector, the political climate may also improve. Natural gas has a number of features that make it favorable as a political issue. For environmentalists, it emits less carbon than oil and coal, and after the BP disaster, it’s a plus that gas is mainly obtained via land drilling. There’s some concern about potential ground water contamination from the fracking techniques used in shale gas drilling, but oil and coal extraction are not without their own problems.”

“Also working in favor of natural gas is the fact that, at least for now, natural gas is cheaper than oil. The ratio of oil to natural gas prices was about 11 in 2008 before the financial crisis, but climbed to 24 last year as oil prices rallied and gas prices tumbled, before working its way down from that extreme. With oil prices down in the past month and natural gas prices up, the ratio has moved to 15.5, still on the high side,” Dion Reports.

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 other 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.  You can also visit our U.S. Natural Gas ETF (NYSE:UNG) category for more insight.

United States Natural Gas Fund (NYSE:UNG)           

The United States Natural Gas Fund, LP (NYSE: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. 

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.           

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.           

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.           

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.           

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.


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