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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35345  
Subject: Re: OT: Went Long 100sh of UNG Date: 3/22/2012 5:29 PM
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You probably know the problems with all futures contracts/ETFs, particularly commodities, but this on ng and contango is VERY true.

Hockeypop,

Actually, I didn't even think about contango before I put on the position. And now that you mention the problem, I do remember reading about it at Seeking Alpha. So, yes, I did a dumb trade on which I'll probably lose money.

A couple of months ago, I wanted to buy UNG, because I was poking around in the energy and natural gas bonds (corps and munis, some of which I even bought) but had backed away from UNG then. As part of my DD, I trying to see where prices for the underlying (oil, NG, coal) were headed, and I kept reading positive reviews for NG as being the more sensible fuel for cars than electricity. (Heck, a friend converted his truck from gasoline to NG back in the '70s.) This country has tons of NG, just as we have tons of coal. But one of the tricky things about buying utilities (stocks or bonds) is determining whether/how they'll be impacted by imported oil prices and/or carbon emissions regulations. Also, as part of an attempt to hedge those energy/utility bonds, I had been looking at puts on UNG, trying to cobble something together.

So my buying UNG this time around was more of a "love" trade than a rational decision (which is what happens to me when I've got more cash than common sense). On a 5-year chart, prices looked rock bottom. So I was willing to put a position on Soros' advice of "Invest, and then investigate". If I lose a few bucks (due to stupidity or inattention), it won't be the first time, and it will be a cheap lesson if I learn to look more closely next time at what I'm buying.

Thanks for your comments.

Charlie
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