Other natural gas ETFs are also gaining ground on the increased natural gas usage. the United States 12 Month Natural Gas Fund (NYSEArca: UNL) is up 3.9% year-to-date and the Teucrium Natural Gas Fund (NYSEArca: NAGS) is 2.8% higher so far this year. The two natural gas ETFs track a basket of later-dated futures contracts. While holding multiple contracts with varying maturities could help even out the performance, the funds can underperform in a backwardated market – a downward sloping futures curve where contracts with a later date are cheaper than the current spot price. [Natural Gas ETFs Look Toasty During Artic Blast]
Investors interested in a more aggressive approach to natural gas can look at the ProShares Ultra DJ-UBS Natural Gas ETF (NYSEArca: BOIL), which attempts to deliver twice the daily performance of natural gas, and VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ), which tries to provide three times the daily performance of natural gas futures. BOIL surged 13.9% Friday while UGAZ gained an impressive 20.8%.
Due to the daily rebalancing and compounding effects over time, the leveraged funds may not perfectly reflect their 2x or 3x strategies over a long period. Investors have typically used geared funds as a short-term hedges or as speculative plays.
U.S. Natural Gas Fund
For more information on natural gas, visit our natural gas category.