The Premium In The Natural Gas ETF Should Dissipate With New Shares

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September 28, 2009 2:33pm NYSE:UNG

buyer-beware“The United States Natural Gas Fund LP (UNG) resumed issuing new shares Monday, ending a long drought for the exchange-traded fund

 (ETF). UNG, which tracks price changes in natural gas, hasn’t issued new creation baskets (blocks of 10,000 units) since June, thanks in part to newly enacted position limits on the federal and exchange level,”  Elizabeth Harrow Writes From Blogging Stocks.

“While it’s back to business as usual, traders should still proceed with caution when it comes to this commodity-based fund. UNG warned late Friday that its units are still trading at a premium to its net asset value (NAV), which could spell trouble for investors,”  Harrow Writes.

“UNG’s management cannot predict what impact, if any, the resumption of creation activity will have on the price of the UNG units on NYSE Arca,” warned the fund’s managers in an SEC filing. “It is possible that the resumption of creation activity … could reduce or remove any premium over NAV. Investors are cautioned that paying a premium over the NAV for UNG units can lead to additional losses for the investor in the event that the investor sells such units at a time when the premium is no longer present in the market price.”

Full Story: HERE

The investment (UNG) seeks to replicate the performance, net of expenses, of natural gas. The trust will invest in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire. It is nondiversified.

Chart for United States Natural Gas (UNG)





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