UNG tracks perfectly on the way down, but now?

Discussion in 'Trading' started by Relleum, Oct 7, 2009.

  1. Relleum

    Relleum

    Tell me how the heck this happens. UNG happily tracks the same kind of movement, the same magnitude swings during the demise of natural gas in the last year. Now, when natural gas doubles with nearly 100% gain in what seemed like a nanosecond, UNG sits with only a 36% gain. Where's the other 64%?

    Even in the short term, how could anyone do anything but short these stupid etfs? I mean, look at the nat gas spike on the left, and the fizzle on the right. UNG should be anywhere from 17-20/share. WTF, I want the double that I deserve by buying UNG at $9.10.

    [​IMG]
     
  2. hajimow

    hajimow

    Because when NG went down to $2.5, UNG did not go down that much. NAV vs IV difference was like 25% that time. Also contago loss is another reason.
     
  3. CET

    CET

    UNG was trading at a premium for a while when they could not issue new shares. I believe they have now issued the 7M new shares, and my guess is this has a lot to do with the discrepancy. I am sure others will chime in.
     
  4. Devin Brady

    Devin Brady ET Sponsor

    Contango is a killer for these ETF's.
     
  5. If you are have over %20 profit from your $9.01 trade take your money. You have to game the the contract roll over as in the real commodities trading when using USO and UNG. This ETF will lag the current spot price. Watch the pre market T/S action tommorow morning vs. the open price.

    Akuma
     
  6. Relleum

    Relleum

    I'm seriously considering taking half off the table today. I understand the forces against this ETF, but it still doesn't explain the very tight following of UNG to natural gas in the last year *right up until the last move up*. I expected some underperformance due to the premium dissipating from issuing new shares, but it is just too stark of a difference in too short of a timeframe to be explained by that. Plus, yahoo shows a nav of 11.28, which reveals that the premium hasn't completely disappeared.
     
  7. hajimow

    hajimow

    Check NAV by ^UNG-IV