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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?

  • 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 '15 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 '15 at 8:46
  • "You want to be greedy when others are fearful." – Rocky Apr 28 '15 at 3:24
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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

  • So, shorting both should show a profit long term, no? – JoeTaxpayer Apr 30 '15 at 0:56
  • Possibly, if you can continuously rebalance. – base64 Apr 30 '15 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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