Natural gas futures have a direct influence on natural gas prices. The benefit to this is that there is transparency in the price of natural gas. Anyone can turn on CNBC, pick up the Wall Street Journal or look for the price online. No longer are natural gas prices shrouded in secrecy.

So what can we do with this information? You can invest in natural gas in several ways. One way is to trade the natural gas futures on the New York Mercantile Exchange. This is the largest natural gas futures contract in the world. This contract is called the Henry Hub natural gas contract since it is based on delivery of gas to the Henry Hub gas processing plant located in Louisiana. This futures market was opened in 1990, and natural gas futures options were introduced in 1992 as a further way of hedging natural gas prices.

Natural gas contracts are traded 2 ways. First is the open outcry way. This is where your order is directed to the trading floor and executed in the natural gas pit. These are the people you have seen in movies like Trading Places and on TV jumping and screaming at each other to make a trade.

You can also choose to execute your trades electronically. Here you will select a price on your computer at which to trade. Since open outcry and the electronic trade off of each other, the prices will be the same.

You would need to open a futures or commodity account with a broker. You can find many of them online. You will need see how much money you will need to open an account, what their margin requirements are and how much they will charge per trade. Not all futures brokers charge the same commission. You will need to check commission prices and the level of service they will offer you. Do you prefer to do your own research or do you want to be guided by the broker?

If you do decide to trade off a screen, you will then have to invest in a fast computer and a high-speed cable connection. You don’t want to be left in the dust by faster traders. You will also have to choose which trading platform and charting software you want to use too.

Another way to trade natural gas futures is to invest in a natural gas ETF (exchange traded fund). One of the most popular natural gas ETFs is the United States Natural Gas Fund (ticker symbol UNG). This gas ETF purchases the front month futures contract on the NYMEX. When the front month is within 2 weeks of expiration, they will then “roll” the contract into the next month. This means they will sell their position in the front month and at the same time purchase the next month contract so you are always “long” the market.

What if you think the price of natural gas is going down? How can you profit from that? Once again you can trade a natural gas ETF that is based on the movement of the futures contract. The Horizons BetaPro Natural Gas Bear Plus ETF sells or gets “short”’ the front month natural gas futures. This ETF also “rolls” its contracts forward near expiration so you will always be short the natural gas market.

Now you know how natural gas prices are set and how you can profit from them.

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• Natural Gas ETF Short Funds
• Natural Gas ETFs and the CFTC New Rules
• Wildcatters Exploration & Production Equity ETF Review
• Why you should trade the Natural Gas ETF over futures and index funds.
• Natural Gas ETF frequently asked questions (FAQ)

Why should you trade a natural gas ETF short fund? You will find it is easier to trade a fund designed to be short the market than trying to do it yourself. If you want to short natural gas futures, you would need to open a futures trading account. If you wanted to short natural gas companies, you would need to go to your stock brokerage firm, set up a margin account, and hopefully be able to borrow the shares you want to short. By selecting the right short gas ETF, you can be short the market with the click of a button.

Here are a few short natural gas ETFs to choose from:

Horizons BetaPro NYMEX Natural Gas Bear Plus ETF (HND-TSX) 2x

ProShares Short Oil & Gas (NYSE-DDG)

ProShares UltraShort Oil & Gas (NYSE- DUG) 2x

ETFS Short Energy ETF (SNRG-LSE)

The Horizons BetaPro Natural Gas Bear Plus ETF is perhaps the purest short natural gas play there is. This fund is based on the nearby or front month natural gas futures contract traded on the New York Mercantile Exchange (NYMEX) This fund takes a short position in the front contract. Since each month the front contract will expire, this fund will need to switch the fund into the next contract month. Beginning with the 5^th business day of the month, the fund then begins to “roll” the contracts into the next contract month. This will take place over 8 days until the fund sells all its contracts in the expiring front month and buys contracts in the new front month. Another interesting aspect of this fund is that it is a leveraged fund. The Natural Gas Bear Plus ETF attempts to match twice (200%) of the daily price move. This fund is traded on the Toronto Stock Exchange and its ticker symbol is HND.

The ProShares family of fund offers 2 ETFs that invest in natural gas related companies. The ProShares Oil & Gas ETF (DDG) shorts stocks that make up the Dow Jones U.S. Oil & Gas Exploration & Production Index. The companies that are included in this fund are oil drilling equipment and service, pipelines, gas producers and service companies. Recent companies in this index (which is subject to change) are Exxon, Chevron, Apache and Halliburton. This energy ETF attempts to mimic the single day return (before fund expenses) of the under lying index.

If you want more bang for your buck, they offer the ProShares UltraShort Oil & Gas ETF (DUG). This fund is the same as the Short Oil & Gas ETF, but is leveraged to attempt to earn twice the return of the DDG ETF. Since you are trading a leveraged ETF your risk is twice as much, but the profits can be 2 times as large. You must access your risk before entering a leveraged fund.

Another short gas ETF to look at is the ETFS Short Energy ETF. This energy ETF shorts the natural gas market in addition to crude oil, unleaded gasoline and heating oil. The Short Energy ETF is based on the Dow Jones-UBS Energy Subindex. This fund invests in the previously mention crude oil gasoline and heating futures markets. This ETFs symbol is SNRG and is traded on the London Stock Exchange.

There you have a look at different ways you can be investing in short Natural Gas ETFs. If you feel prices are collapsing and going lower, then you should invest in Natural Gas ETF short funds.

Possibly Related Posts:

• Natural Gas Futures, How They Effect Natural Gas ETFs
• Natural Gas ETFs and the CFTC New Rules
• Wildcatters Exploration & Production Equity ETF Review
• Why you should trade the Natural Gas ETF over futures and index funds.
• Natural Gas ETF frequently asked questions (FAQ)