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I'm looking at buying stocks and noticed that the price of natural gas is almost at an all time low. In particular I'm looking at a stock called UGAZ (3x leverage) This seems like a good buying opportunity to me because I don't feel that these natural gas prices can stay so low. However, that's just speculation.

Is there a fundamental reason gas is so low right now? And what would cause it to recover? Aren't these prices too attractive not to buy?

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  • Not sure if this question is on topic or not, but I agree. I think it's a buying opportunity, too. I chose a gas utilities fund as a long-term investment.
    – Rocky
    Apr 27, 2015 at 3:51
  • I wouldn't be so sure. With Iran coming online I would seriously doubt natural gas prices would recover so soon.
    – DumbCoder
    Apr 27, 2015 at 8:46
  • "You want to be greedy when others are fearful."
    – Rocky
    Apr 28, 2015 at 3:24
  • @Rocky yeah, if you know why.
    – Jonast92
    Jan 7, 2020 at 10:56
  • @Jonast92. Indeed. Interestingly, that gas fund I bought in 2015 (GASFX, and sold in 2018) only went up a bit in NAV before I sold, but I collected some dividends along the way. Not as good an investment as I had hoped. OP's stock (UGAZ) continued to plummet after his post.
    – Rocky
    Jan 8, 2020 at 1:04

2 Answers 2

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You do not hold leveraged ETF for longer than a few days.

You have UGAZ and DGAZ, both 3x leveraged, one longs one shorts.

What happens if you buy both? You don't get 0% return. In fact, you get -10% return if you hold both for 3 months.

UGAZ and DGAZ

No matter what happens, they both go down in long term.

Call it Leverage Decay, Beta Slippage, Contango, Rollover, etc.

If you want to gamble that NG goes up within 3 days, go ahead. Just be prepared for the worst cases like losing 15% in 3 days.

If you want to speculate the NG will recover in a year, buy Natural Gas industry ETF http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FCG

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  • So, shorting both should show a profit long term, no? Apr 30, 2015 at 0:56
  • Possibly, if you can continuously rebalance.
    – base64
    Apr 30, 2015 at 1:41
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Don't try to catch a falling knife. The fact that the prices were falling for this long means that the professional traders in this market expect gas prices to keep going down. This may be for many reasons, which they know much better than you do. So it's likely that gas will keep falling for a while longer.

Wait until gas starts to recover, and then go long on gas as base64 suggests.

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