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.
Another reason to trade natural gas is because it is plentiful in the United States. Many people are pushing for more drilling here in the U.S. to tap into our vast reserves. Americans wants to get away from our dependence on foreign oil and want to use energy resource right here at home.
Recently Billionaire T.Boone Pickens has been promoting the use of natural gas for producing electricity and using it as an alternative fuel for vehicles. And just this week Exxon has purchased XTO Energy, one of the largest natural gas companies around. If the big boys are looking at natural gas, shouldn’t you?
How does a Natural Gas ETF work?
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.
One of the most popular Gas ETFs is the United States Natural Gas Fund, ticker symbol UNG. This fund tries to replicate the daily percentage moves of the natural gas futures contract on the New York Mercantile Exchange. This fund invests in the spot month futures contract. When the contract has 2 weeks left before expiration, the fund then rolls the contract to the next contract month.
I hope this has interested you in trading the Natural Gas ETF. Please look further into this exciting market.
You can find more about natural gas etf and learn how to trade natural gas mutual funds
