Hi everyone, I'm a long term investor and have decided that I want long term exposure to natural gas at these levels. No matter how I look at it, I keep coming back to the fact that buying a few Nymex minis and rolling them over is probably the best way to go.....as oppossed to say some of the Trusts, like AAV that are beaten up as well. Anyone care to fill me in on some of the logistics of having to roll over contracts. Is the spread on the mini tight enough at month end to safely roll forward without facing spreads? Also, what do you guys think would give the bigger bang for you buck, a fully paid for Nymex mini position or a trust like AAV?
Carrying costs are not unsubstantial. Prices vary greatly, and the difference between October gas and January gas is definitely substantial. In other words, it depends. Sometimes rollover is easy; sometimes it means taking on a new contract at a greatly elevated price. Long-term trading in natural gas e-minis is possible, but I would suggest a limit order and an awareness that there is little liquidity for distant months. I wish there were a natural gas etf such as USO. Perhaps one day there will be, but I imagine that the variability of contract prices would make that difficult. Natural gas trading is not for the faint of heart. If you are wrong, you can really get hurt. If you're right, you can make big money fast, even with the e-minis. The fundamentals of the natural gas market are fascinating. I am still learning! Good luck.
Natural gas futures will provide the bigger bang. The dividend for that fund is mind boggling. Long-term investors should probably stick to the AAV, especially if they have it in an IRA.
The AAV has a sweet dividend: close to 18%. If you wanted the payout for September, today the 26th was the last day you could get in, since the div is payable to those who are shareholders as of Sept 29 (three day settlement). Long-term holders with an IRA should consider the AAV over the futures, even though the futures would provide more bang for the buck.
Can't think of an easier way to lose money. The rollover costs alone will kill you. Go short instead.
Interestingly, i think the London Stock Exchange is launching the ETC (exchange trade commodities) either today or very soon. That could also be another interesting way to play gas or anything other raw materials over the long term. Any thoughts?
i agree with the above posters. the jan emini with 2 months till exp(exp's dec 26th) is a whopping $7.75 or almost $2 more than the front month. outside a huge cold winter with such huge stockpiles going into winter it's a loser. and i'd enver play the stock like chk as they've not fallen at all. last winter chk hit $26 as ng fell from $15 to $10. here's ng hitting a low near $4 and chk is $29.. your best bet is to try to scalp a trade on the front month if you see ng turn up
Listen, it does not matter which instrument you use. The only right way to play energy long-term is to go short. Do you have the balls for that?
Buy a trust, or a heavy NG play like CHK or DVN. Or find a drilling partnership to get involved in. PM me about that. Don't fool around with the futures unless you want to speculate on price - there is nothing long term about them (besides the money you'll be missing from your account); they are purely price plays.