Seeking Alpha

Don Dion's  Instablog

Don Dion
  • on IPO Analysis
  • on Financial
  • on Conglomerates
Send Message
Don Dion (donalddion@gmail.com, @DRDInvestments) is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family.... More
My blog:
fidelityadviser.com
My book:
The Ultimate Guide to Trading ETFs
  • Ultimate Guide to Natural Gas Futures 1 comment
    Sep 11, 2009 12:31 PM | about stocks: UNG, GAZ

    Investors who want to invest in natural gas futures have two choices in the U.S. market: United States Natural Gas (NYSEARCA:UNG) and the iPath Dow Jones-UBS Natural Gas Total Return Subindex ETN (NYSEARCA:GAZ).

     

    UNG and GAZ offer investors exposure to natural gas futures contracts. Unlike the precious metals, these funds do not store gas, and that has been a sore spot for investors in 2009. Futures contracts cannot be bought and held; they must be…READ MORE

Back To Don Dion's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • User 341510
    , contributor
    Comments (5019) | Send Message
     
    zbf Since I have had such a hot hand in natural gas, many have asked me to comment on yesterday’s surprise announcement that the ETF, UNG, finally got permission to issue new shares. The easy answer here is that UNG will crater. There is no reason for the fund to trade at a premium whatsoever, which at one point traded as high as 20%, an overvaluation you normally only see in closed end funds at bear market bottoms. These ETF’s are simply pass through vehicles which make it easier for investors to own NG in stock form when they are legally unable, or too lazy to open a futures trading account. They should never trade more than 1% out of line with the underlying to account for the admin and execution costs of running such an instrument. The people who made the killing here were the handful of hedge funds that were able to borrow UNG shares, sell them short, and go long the futures, locking in a guaranteed 20% spread. They will cash in their profit next week. Something similar is still going on where smart industry players have locked up salt caverns to store gas, buy it cheaply on the spot market, and sell it forward. This is possible because yesterday you could buy October at $3.25/MCF and sell it for April delivery at $5.32, giving you an annualized return of 127%. Leverage that, and you are talking about some serious money. If you were wondering where the money was coming from to buy those G5’s, this is it. The fundamentals for the industry are still terrible, and there is a risk that the market could completely grind to a halt when the country runs out of storage, so the volatility will remain huge. This week’s move explosive 44% move from $2.40 to $3.44 was nothing more than pure short covering. I expect a quick double in NG once the storage issue is resolved, and the cheapest, cleanest, and most liquid way to participate is though the futures. If you need help in how to do this, e-mail me at madhedgefundtrader@yah...
    12 Sep 2009, 02:12 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.