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Commodity ETF Investing: Four Strategies For Fighting Contango

Michael Johnston — Wed, 15 Dec 2010 15:00:10 +0000

As the ETF industry has grown and evolved, the product lineup has become increasingly sophisticated. Many of the products now hitting the market are designed to address issues posed by earlier indexed products, as issuers strive to devise new strategies for accessing both traditional and exotic asset classes. A number of issuers, led by Schwab and Vanguard, have lowered costs on stock and bond funds, seeking to attract cost-conscious investors. Last week, Rydex rolled out a suite of equal-weighted equity ETFs that many investors believe are a more appealing option than cap-weighted funds. And in the commodity space, a number of issuers have introduced products that seek to address what some perceive as an oversized impact of contango on fund returns. Contango occurs when longer-dated futures contracts are more expensive than those that are approaching expiration; in other words, the futures curve is upward-sloping. This may be the result of [...]

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Oil ETF Investing: Five Ways To Play

Michael Johnston — Mon, 02 Aug 2010 15:29:54 +0000

Commodity ETFs have seen a tremendous surge in popularity in recent years, as the marriage of futures contracts the exchange-traded structure has democratized an asset class that was once accessible only to large, sophisticated investors. Oil ETFs have become particularly popular, as investors have embraced the opportunity to bet on one of the world’s most sought after resources. Because oil is a major cost component for both companies and consumers, many investors have embraced the opportunity to hedge against an increase in costs by establishing exposure to the commodity. And because it is subject to wild price swings–crude has touched both $140 and $35 in recent years–speculators have embraced this resource as an opportunity to generate big profits in a relatively short period of time [also see The Definitive Oil ETF Guide]. Investing in oil through ETFs is not the simple binary process that it once was; there are a [...]

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Finding The Right Oil ETF For A Crude Rally

Michael Johnston — Wed, 19 May 2010 16:33:22 +0000

As storm clouds continue to gather over the euro zone, the repercussions of a rise in uncertainty have been felt in nearly every corner of the global economy. All assets denominated in euro have fallen out of favor. Financial stocks with exposure to European debt have been sold off. Even South American emerging markets have been battered by a wave of risk aversion as investors seek out the security of safe havens. Crude oil has also felt the weight of uncertainty in recent weeks, as front-month futures contracts have now declined in ten of the last 11 trading days, the longest losing streak since October 2003. After an early rally dissipated on Tuesday, crude settled below $70 per barrel. The United States Oil Fund (USO), which offers exposure to crude through a futures-based strategy, has now lost more than 16% over the last month and 10% over the last week [...]

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UNG vs. UNL: Early Update

Michael Johnston — Thu, 17 Dec 2009 15:01:12 +0000

The United States Natural Gas Fund (UNG) has been one of the most perplexing exchange-traded products of 2009. The fund has lost almost 60% so far this year, but has seen cash billions of dollar in cash inflows ($5.4 billion through November, well more than the $4.0 billion in total assets the fund had at the time). So when U.S. Commodity Funds introduced a 12 Month Natural Gas Fund (UNL) in mid-November, it seemed like a “can’t miss” product, a fund offering exposure to the same commodity without some of the drawbacks that have led to the poor returns [see more information on UNL's fundamentals page]. UNG vs. UNL UNG and UNL are very similar in many respects. Both invest (primarily) in futures contracts on natural gas traded on the NYMEX. Both “roll” their holdings as they approach maturity, in order to avoid taking physical possession of the natural gas [...]

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UNL: A Better Natural Gas ETF Than UNG?

Michael Johnston — Thu, 19 Nov 2009 17:29:16 +0000

U.S. Commodity Funds, the issuer behind ultra-popular commodity ETPs such as UNG and USO, has launched the United States 12 Month Natural Gas Fund under the ticker UNL. The investment objective on UNL is to reflect the changes in percentage terms of the spot price of natural gas delivered at Henry Hub, Louisiana, as measured by the changes in average of the prices of 12 NYMEX natural gas futures contracts, consisting of the near month contract to expire and the contracts for the following 11 months. UNL will “roll” near month futures contracts when they are within two weeks of expiration. UNL is very similar in some ways to the United States Natural Gas Fund (UNG), but very different in others. UNG has become one of the most popular exchange-traded commodity products this year as investors have sought out ways to gain exposure to natural gas prices. Due to the [...]

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New Short Crude Oil ETF Offers Unique Exposure

Michael Johnston — Sat, 26 Sep 2009 11:00:13 +0000

Denver-based United States Commodity Funds has launched another exchange-traded commodity product, its first to offer inverse exposure to commodity prices. The United States Short Oil Fund (DNO) began trading this week on the NYSE Arca Exchange. DNO is the sixth product from United States Commodity funds, joining products offering exposure to crude oil (USO), natural gas (UNG), 12-month oil (USL), gasoline (UGA), and heating oil (UHN). DNO will seek to track the inverse of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the price of futures contracts on the commoidty. The fund will invest in near month futures contracts, except when the near month contract is within two weeks of expiration, in which case it will invest in the next month’s contract. The launch of DNO comes in a very interesting and uncertain regulatory environment. The Commodity Futures Trading Commission is “breathing down [...]

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This Week in ETFs: September 18th Edition

Eric Dutram — Fri, 18 Sep 2009 19:47:23 +0000

It’s been an interesting week in the world of ETFs: The United States scrapped a missile defense system in Eastern Europe and gold is now holding steady above $1010/oz. Here are the ETF Database staff picks of the week’s most important and interesting stories from around the Web: Why Emerging Market ETFs Are Still Safer Than Developed ETF Counterparts at ETF Expert: The author highlights several reasons why he believes that emerging markets are a better investment than domestic funds. These reasons include a surprisingly low amount of increased volatility when adding emerging market funds to a portfolio, currency risk and growth prospects. The author, Gary Gordon, truly makes a compelling case for increased emerging market investment. ETF Plays for $3,000 Gold at ETF Database: Michael Johnston discusses how several prominent investors have begun to forecast a dramatic increase of the price of gold to well over $3,000/oz. Michael says [...]

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ETF Database » USL

Commodity ETF Investing: Four Strategies For Fighting Contango

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Oil ETF Investing: Five Ways To Play

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Finding The Right Oil ETF For A Crude Rally

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UNG vs. UNL: Early Update

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UNL: A Better Natural Gas ETF Than UNG?

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New Short Crude Oil ETF Offers Unique Exposure

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This Week in ETFs: September 18th Edition

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