The price of natural gas has moved quite a bit this year. It has traded from over $ 6 down to $ 2.50 and back to over $ 5 now. With big swings in prices like this, there are opportunities for the wise investor to profit in this sector.
Whether you are a trader or investor, you will be able to find the right investment for you in natural gas. This article will show you different ways to trade natural gas. You will find Natural Gas ETFs that invest in stocs of producers,drillers and even futures.
Why trade natural gas? Natural gas is becoming more important in supplying the energy needs of the United States. Natural gas has been gaining in popularity for the generation of electricity for both residential and industrial markets. It is becoming popular since natural gas burns cleaner than coal. With the focus on global warming, there will be a push to use more natural gas for electricity generation.
Supplies of natural gas are increasing. This is another reason to trade nat gas. With better ways of drilling for natural gas, plus new gas fields that have been discovered, you should see an increase in natural gas usage. Plus you also have Americans wanting us to use our own energy resources here at home as opposed to importing our energy needs.
Big investors have recently entered into the natural gas market. Last year oil tycoon T. Boone Pickens was running television ads touting the benefits of switching to natural gas. ExxonMobil, the worlds largest oil company recently purchased XTO Energy, a large player in the natural gas market. If a billionare and a large oil company are investing in natural gas, shouldn’t you?
How to Trade Natural Gas ETFs
ETF is an Exchange Traded Fund. An ETF is similar to a mutual fund. An ETF can be made up of several stocks in that sector. An example would be the SPDR S&P Oil & Gas Exploration & Production ETF, ticker symbol XOP. This fund tries to replicate the total return performance of the S&P Oil and Gas Exploration & Production Select Industry Index. This fund holds stocks in natural gas companies that are involved in exploration and production of natural gas. Some of the stock that make up this fund are ExxonMobil, Chevron, Conocophillips, Occidental an Chesapeake Energy Corp. Please refer to the funds prospectus for the current holdings of the fund.
Perhaps the most popular natural gas etf is the United States Natural Gas Fund. The United States Natural Gas Fund, ticker symbol UNG, invest the entire fund in natural gas futures traded on NYMEX. This is an unleveraged fund and purchases the front month futures contract. When the contract is about to expire, it rolls them into the next contract month.
This is just an introduction to trading Natural Gas ETFs. Continue your research on this profitable market.
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