They should not be touting these commodity ETF's as "investments" for "diversification" -- clearly it's just a short term trading vehicle.
great explanation, perfectly crystal clear. thanks so much for taking the time!! so i am assuming yes, this is not biz as usual for UNG with the contango going way beyond normal carrying cost, supply/demand premiums? if you traded it back in 2008, was it just that there was a much smaller premium to cover each roll forward or it was just ripping up so quickly that it didn't matter? i may trade in the UNG or as it is as close as i am going to get to actually owning NG without the headache of futures, just add a few fundamentally sound related stocks(APC, WMB, OXY). any other stock ideas for me to look at are of course welcomed. again, thanks so much for the words of natty enlightenment and welcome to the travelboysteve new guy
good point, like if you are holding the position overnight and getting short interest as opposed to just buying SDS or whatever and getting unnecessarily reamed by the long margin interest.
For the bulk of my holdings: I like holding solid company stocks that meet certain criteria, and ETF's in US and foreign markets. I like what other countries are doing and have been doing and there are a few stocks, ETF's that are worth looking at. I think there are like 715 ETF's, but I only look at certain types in certain sectors, (depends on timeframe of hold) and make sure they are optionable. I enjoy the "sure and steady" along with my diet of excitement. Thanks Colonel for the welcome,..... Cheers
Even buying futures will only get us the same result as buying UNG. The above crude oil example of $33.5 low was the Feb contract and today's price of $66.5 is the July contract. So during that time we would have to rolled over a few times and lost part of the profit (with each roll over it cost us the premium). So buying crude oil futures in feb and roll over would get us the same return as USO (~58%) instead of doubling our return. What USO does is to buy futures contracts for you and it roll over and charge you a small management fee for doing that. The only way to get the full return is to store up physical crude. This is what many funds do today. They rent tankers and store up physical crude to take advantage of the contango structure. If you look at the oil tanker rate they're going way up. Oil producers are doing the same thing and renting more storage facility to store up physicals. So we can be pretty sure crude and natgas physicals are going up in the mid term (say next year or two). We just don't know if it would go up enough to cover the roll over cost. I suspect it would go way up and we can still make good money with futures and ETFs. Just that the cost seems very high especially for Natgas. Unforturately for us little guys there is no way to take full advantage of the ultra low crude (in feb) and natural gas price (today). USO and UNG unlike GLD are not storing up actual physicals in a facility. All they do is to buy futures contracts and trying to "track" the price of the physicals using futures. I've searched quite a bit but I cannot find any Crude or NatGas ETF that have physical storage. I don't think it exist otherwise I would have buy an ETF with physical storage rather than buying oil/gas producer stocks. If anyone know of a viable way to own physical natgas please let me know!!!