ETF Trends
ETF Trends

It’s better late than never for a new exchange traded fund (ETF) that tracks the price of gas.

The United States Gasoline Fund (UGA), from provider Victoria Bay Asset Management, began trading yesterday. It’s the first ETF that directly follows the price of gas by tracking futures contracts, reports Murray Coleman for Index Universe.

This ETF comes not a moment too soon. With gas prices soaring to new heights, putting a crimp on household budgets, this fund could be a salve. Some experts are predicting that gas prices could reach $4/gallon by spring, according to Jad Mouawad for the New York Times. It might be time to oil up that bike and fill the tires with air.

UGA doesn’t wait until futures contracts expire before rolling them. Instead, they roll from one contract to the next within two weeks of expiration.

Investor beware: Be sure you understand the risks of exposure to backwardation and contango, and the gas market is currently is big-time contango. The March contract is valued at $2.56/gallon, while April is $2.72/gallon. If the fund rolls from March to April with those prices, an investor will lose money.

Victoria Bay will soon have a line that covers the four major energy commodities traded in the United States. It already offers United States Oil (USO), which launched in April 2006, and the United States Natural Gas Fund (UNG). It has filed for a heating oil fund, as well.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.