pedro01
Guest
- Messages
- 1,058
- Likes
- 150
An really interesting article on Natural Gas here :
Natural Gas ETFs: Not a Good Investment -- Seeking Alpha
The upshot is that so many have got in to take advantage of the pending bounce that the ETFs are way over valued.
The article also mentions that the natural gas futures for the nov, dec contracts are trading at high prices & so even trading the futures is not a good bet.
Now - this is interesting to me as I'm not a commodities guy at all. Index futures, sure but I have not dabbled in futures. I only looked at this because a friends husband wanted to buy 5,000 Euros in ETF LNGA (LSA) when it was at $1.83. I persuaded him not to try to catch the falling knife and now the ETF is $1.21.
If you look at the Mini natural gas futures on NYMEX, where the price moves $12.50 per ever $.005 in the underlying, the total downside per contract is less that $7,500.
(It's not very liquid but then I'm not talking about scalping it).This sounds like a free lunch to me - why not just buy now & hold till it does up ? Of course, there aren't any free lunches.
It's a monthly contract & you'd need to roll it. Is it possible that when the time comes to roll the contract that there is a huge price differential between the old & new contracts ? I am expecting that gap to close as expiry approaches but I have no proof for putting money on that expectation.
From the article above, it seems that there's not much money to be made when natural gas turns, with the exception of going for the companies involved. Is this really the case ?
Cheers
Pete
Natural Gas ETFs: Not a Good Investment -- Seeking Alpha
The upshot is that so many have got in to take advantage of the pending bounce that the ETFs are way over valued.
The article also mentions that the natural gas futures for the nov, dec contracts are trading at high prices & so even trading the futures is not a good bet.
Now - this is interesting to me as I'm not a commodities guy at all. Index futures, sure but I have not dabbled in futures. I only looked at this because a friends husband wanted to buy 5,000 Euros in ETF LNGA (LSA) when it was at $1.83. I persuaded him not to try to catch the falling knife and now the ETF is $1.21.
If you look at the Mini natural gas futures on NYMEX, where the price moves $12.50 per ever $.005 in the underlying, the total downside per contract is less that $7,500.
(It's not very liquid but then I'm not talking about scalping it).This sounds like a free lunch to me - why not just buy now & hold till it does up ? Of course, there aren't any free lunches.
It's a monthly contract & you'd need to roll it. Is it possible that when the time comes to roll the contract that there is a huge price differential between the old & new contracts ? I am expecting that gap to close as expiry approaches but I have no proof for putting money on that expectation.
From the article above, it seems that there's not much money to be made when natural gas turns, with the exception of going for the companies involved. Is this really the case ?
Cheers
Pete
