Commodity ETFs News:

The largest ETP focused on Natural Gas, UNG (U.S. Natural Gas Fund, Expense Ratio 0.60%) has seen an uptick in options trading recently with activity in the January 15 puts (UNG is currently trading at $17.67).

It is apparent that investors are concerned with additional possible downside in months to come.

The fund is off nearly 8% just in the trailing one month period and is trading at its lowest level since the end of 2012.

Trading volume in recent sessions has also notably spiked in the past several days, and we would expect this trend to continue so long as the price distress is present in Natural Gas.

While not necessarily the most efficient ETP in terms of tracking spot Natural Gas prices due to inherent contango issues that have been well documented in the ETF media since this fund’s inception in 2007, none of this changes the fact that UNG holds $814 million in assets under management presently as well as the fact that it trades a hefty 4.9 million shares on an average daily basis.

It remains the “benchmark” or “tracker” for Natural Gas exposure in the ETP landscape, at least for now it seems.

UNL (U.S. 12 Month Natural Gas Fund, Expense Ratio 0.75%) and NAGS (Teucrium Natural Gas Fund, Expense Ratio 1.50%) are newer entrants to the space with different tracking methodologies than UNG, but both remain rather small in terms of daily flows as well as assets under management.

Other funds in the space include GAZ (iPath DJ-UBS Natural Gas Subindex Total Return ETN, Expense Ratio 0.75%), GASZ (ETRACS Natural Gas Futures Contango ETN, Expense Ratio 0.85%), and DCNG (iPath Seasonal Natural Gas, Expense Ratio 0.75), with GASZ and DCNG standing out particularly because of their specific make-ups.

GASZ, with only $11 million in assets under management and having debuted in 2011 is structured to mitigate the effects of contango in the Natural Gas Futures markets thanks to its index methodology that uses a “blended” futures approach.

GASZ’s trailing one year performance versus UNG and DCNG for example is compelling, with the ETN marginally showing gains during this time period with the other two ETPs down handily in the red. It’s likely too early to call given the limited live track record, but early “lab results” are certainly encouraging in terms of GASZ, and to some degree for DCNG as well. The bottom line is that Natural Gas will likely always be played by institutional money managers and traders alike using ETP strategies, and more tools are available today than say two or three years ago, making for more efficiently hedged strategies as well as more competitive commodity/Natural Gas driven trading strategies.

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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