Tuesday, July 27, 2010

Natural Gas ETFs: UNG vs UNL, Which One Is Worse?

Investors are well aware of how dreadful UNG is (at least the readers here!). Some hope arrived when UNL was launched late last year. Unlike UNG which focuses in one month contracts, UNL invests on the next 12 months of natural gas contracts. The losses have to do not necessarily with the price of natural gas contracts, but with the contango as every month these ETF need to sell their contracts and buy next month contracts, thereby losing sometimes more than 20% (continuously).

Perhaps this chart for their performance year-to-date might reveal the answer:

Both are dreadful, showing a loss of 23/24%.

The chart below shows the price of the front month price of natural gas itself:

You wonder what happened to the money the investors pay for these ETFs. Like leveraged ETFs, money invested disappears ... except that money does not disappears. Somebody pockets it.

Note: You may receive buy or sell alerts on these ETFs by clicking on their links: UNG, UNL.

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