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Analyzing Natural Gas ETFs and Natural Gas Futures

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Mar. 12 2018, Published 8:31 a.m. ET

Natural gas ETFs

On March 2–9, 2018, the ETFs that track natural gas futures had the following performances:

  • The United States Natural Gas ETF (UNG) rose 0.7%.
  • The ProShares Ultra Natural Gas ETF (BOIL) rose 0.7%.

During this period, natural gas April futures rose 1.4%. UNG holds active natural gas futures contracts, while BOIL’s objective is to reflect twice the daily changes of the Bloomberg Natural Gas Subindex on a day-to-day basis.

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ETF returns

Between March 3, 2016, and March 9, 2018, natural gas futures rose 66.7% from their 17-year low. Natural gas ETFs’ price performances during this period were:

  • UNG fell 1.8%.
  • BOIL fell 36.8%.

These ETFs fared worse compared to natural gas active futures because of the negative “roll-yield.” We discussed the roll-yield in the previous part.

As of March 9, 2018, the natural gas futures contract’s closing prices until August 2018 were priced progressively higher—a bearish factor for these ETFs. BOIL’s actual and expected returns could be different due to the compounding effect of price changes on a daily basis.

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