The Curious Case of U. S. Natural Gas (UNG)

By on September 26, 2009

As a speculator/investor, one has to be cognizant of bargains when they become available. Natural gas hit the bargain bin radar after plunging from over $13 in 2008 to under $3 per mmbtu recently. Further bolstering the case for UNG was the fact that Marc Faber claimed, in his opinion, NG was the cheapest commodity.

UNG, a commodity ETF, seemed like a good proxy to profit from the market coming to its senses. I started watching UNG when it was trading around $14 (it had been over $60 in July 2008). I decided to take the plunge and buy at $11.31.

There were disturbing articles that came out indicating that UNG was not issuing new shares since they were overwhelming the futures market with their purchases. UNG would, in essence, be trading like a closed-end fund. UNG then stabilized for a few days, and of course, plunged still further below $10.

Further disturbing developments — UNG was trading at a premium to NAV of over 10%. Being the brave speculator, I decided to double down at $9.04, with plans to double down again every point lower. UNG bottomed out just under $9 and a few days later I was able to exit my total position at $11.45 for a nice profit.

According to, UNG will be issuing new shares on Monday and the premium to NAV has shrunk. UNG is currently going for $11.98 so I could have done better by holding it; but there are no regrets.


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