Markets

A Commodity ETF Idea for a September Trade

A generic image of a pen, a calculator and papers
Credit: Shutterstock photo

Many asset classes are sensitive to seasonal trends, but perhaps none more so than commodities. With that idea in mind, natural gas exchange traded products, such as the United States Natural Gas Fund (NYSEArca: UNG ) and the iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ ) , could be worthwhile trades this month.

Traders are anticipating the sweltering heat could raise natural-gas consumption as households and offices use more gas-powered electricity to run air-conditioning units.

Related: Natural Gas ETFs Heat Up on Warming Weather

The natgas market has been closely tracking weather projections in recent weeks as traders tried to price a shifting outlook on early summer electricity demand for air conditioning. Gas typically dips to a seasonal low during the spring's mild temperatures before hot summer weather raises demand for gas-fired electricity generation.

Analysts now point out that weather updates for mid-June are showing warmer-than-expected temperatures in the southeast, which has strengthened demand expectations in the biggest region for gas-fired power.

Trending on ETF Trends

VIX ETFs Spike on Latest Fed Speculation

Some Relief for Gold ETF Investors

Silver Miners ETF Tries to Find Its Footing

Surprise Decline in Crude Stocks Fuel Oil ETF Rally

Why it's Time to Be Patient With Silver ETFs This Month

"Over the last 20 years, September has been the best performing month for natural gas prices , with October being the 2 nd best. So seasonality is in it's favor right now. That said, it should be noted that the trend has broken down somewhat in the last few years," according to See It Market.

Traders, though, should keep in mind that the summer is winding down and demand for fuel typically declines as the weather cools in the fall. Some analyst are already warning of a potentially new record high natural gas inventory levels in the months ahead.

SEE MORE: Natural Gas ETFs Surge on Smallest Inventory Injection in a Decade

"You will find that September and October are positive 60% and 68% percent of the time, respectively. They are also the best performing months, with average returns of 10.6% and 6.7% respectively," according to See It Market.

One may utilize inverse or bearish ETF options to hedge bets in the coming months. For instance, the VelocityShares Daily 3x Inverse Natural Gas ETN (NYSEArca: DGAZ ) seeks to provide the daily inverse 3x, or -300%, performance of the NYMEX natural gas futures. The ProShares UltraShort Bloomberg Natural Gas (NYSEArca: KOLD ) provides the daily inverse 2x, or -200%, performance.

For more information on the natgas market, visit our natural gas category .

United States Natural Gas Fund

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article was provided by our partner Tom Lydon of etftrends.com.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

VIXY

Other Topics

ETFs