Natural gas ETFs
Between October 27 and November 3, 2017, the United States Natural Gas Fund LP (UNG) rose just 0.2%, and natural gas December futures rose 0.7%. UNG aims to track natural gas near-month futures.
But the ProShares Ultra Bloomberg Natural Gas’s (BOIL) returns were in the red last week. BOIL fell 1.2% over this period, underperforming UNG.
BOIL’s objective is to deliver two times the daily price fluctuation of the Bloomberg Natural Gas Subindex. The fall in natural gas prices early last week could have kept BOIL’s returns in negative territory.
On March 3, 2016, natural gas (FCG) (GASL) (GASX) active futures plunged to their lowest closing prices in 17 years. Between March 3, 2016, and November 3, 2017, natural gas futures rose 82.1%. However, UNG rose 5.7%, while BOIL fell 14.4% during this period.
These natural gas ETFs likely underperformed natural gas futures because of a negative roll yield, as we discussed in the preceding part of this series.
On November 3, 2017, natural gas futures contracts to February 2018 settled at progressively higher prices. For more analysis on natural gas’s futures spread, check out Understanding the Natural Gas Futures Spread: Are Oversupply Concerns Rising?
In the case of BOIL, the compounding of its daily price changes over a long span may also be behind the deviation between its actual return and its expected return.