United States Natural Gas Fund, LP (NYSEMKT:UNG)

CAPS Rating: 1 out of 5

Exchange Traded Fund


Player Avatar mm20001 (32.69) Submitted: 6/26/2009 8:20:58 PM : Outperform Start Price: $130.56 UNG Score: -86.55

This is a potentially hazardous gamble on rising natural gas prices.

According to the prospectus, UNG aims "to have the changes in percentage terms of the units' net asset value reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas."
(Source: http://www.unitedstatesnaturalgasfund.com/PDFS/UNG-Prospectus.pdf)

While this may work reasonably well for short-term speculations, it can be quite disastrous during longer holding periods: from June 07 to June 09 natural gas has fallen from around $8 to $4 for a 50% decline, whereas UNG fell from $50 to $15 for a 70% decline; this is a result of the monthly roll-over of future contracts.

Also, since UNG is a limited partnership, "you will be required to pay U.S. federal income tax [...] on your allocable share of USNG's taxable income, without regard to whether you receive distributions or the amount of any distributions" (prospectus). "The General Partner has not and does not intend to make cash or other distributions with respect to units." Thus, one might end up being on the tax hook for income not made.

Finally, with an investment in UNG an investor is up against professional futures traders that might front-run UNG's roll dates which are published in advance on the website.

With all that working against you, you've got to ask yourself one question: Do I feel lucky?

Report this Post 4 Replies
Member Avatar Marshal82 (91.75) Submitted: 9/10/2009 8:39:07 AM
Recs: 0

Well... do ya?

Member Avatar freddygnj (< 20) Submitted: 9/20/2009 11:38:30 AM
Recs: 0

yes i do; buying nature gas at 13.00 a share , is like buying gold at $300 dallars a oz. this is a three year hold. gs=going up

Member Avatar jlmjlm77 (99.17) Submitted: 3/18/2010 11:57:35 AM
Recs: 0

Was hazardous.

Member Avatar mm20001 (32.69) Submitted: 4/21/2010 9:32:10 PM
Recs: 0

Yep, that about sums it up.

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