“When the prices of those back-month contracts exceed the price of the front-month contract (known as a state of contango), the fund loses money each time it rolls its position. In contangoed markets, a fund like UNG can suffer heavy losses even as natural gas prices rise, warranting investor caution,” he adds. [Natural Gas ETFs to Play the Rally]
Unfortunately, it’s impossible to construct ETFs based on a commodity’s spot price. Instead, investors can choose ETFs that track futures contracts, or shares of commodity producers.
U.S. Natural Gas Fund
For more information on natural gas, visit our natural gas category.
Max Chen contributed to this article.