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They don't all work out. The United States Natural Gas Fund (UNG), which I first wrote about on July 13, 2009 at a price of $11.50, has been stopped out at $8.40. What's more, UNG, as they say, 'has not let a stop loss get in the way of a good downtrend.' In this case, make that a horrible downtrend, as UNG traded at about $7.50 on Thursday.
UNG is a low-cost way for the typical investor to invest in natural gas as a commodity, but it is still a high-risk play. In July, the calculation was that the price of natural gas, despite the likely, large increase in proved reserves and stockpiles associated with the accessing of unconventional gas (also called shale gas) through hydraulic fracturing and horizontal drilling, was forming a bottom.
That calculation has proved to be wrong. Natural gas's price failed to clear $6 per million BTUs, fell back toward $4.11 per million BTUs as the end of the U.S. winter heating season neared, and the commodity price decline weighed on the fund's price, triggering the stop loss.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
That calculation has proved to be wrong. Natural gas's price failed to clear $6 per million BTUs, fell back toward $4.11 per million BTUs as the end of the U.S. winter heating season neared, and the commodity price decline weighed on the fund's price, triggering the stop loss.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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