Wednesday, August 12, 2009

UNG Roll Pain


UNG begins it's Sep / Oct roll tomorrow and last I looked the spread was running around -.25...OUCH. The fund has been averaging -.14 over the last 5 rolls. So the negative impact for UNG holders of the roll is starting to accelerate. The Oct / Nov spread is running around an incredible -.84 and Nov/ Dec -.75! Together those rolls represent 50% of the spot value.

Additionally the risk that the contango may even get WORSE is not small. Inventories and limited storage capacity are a significant factor and there is, as yet, NO EVIDENCE of improvement. In fact, hearing current expectations of this weeks number are for +68/69 with Producing region + 12 /13.

UNG holds a huge percentage of the front month O.I. in NG futures. The current hold on the issuing of new units constrains the fund from adding fresh money to the long side AND as it's stock price approaches new lows for the year under $12.00 , it's fans must be wavering.


Reblog this post [with Zemanta]

No comments:

Post a Comment