Every month or so I stroll over to the dark side of Platinum, otherwise called Platinum Futures, to see what the commodities are doing. One of my favorite default scans to look at is the pre-computed list ranking the commodities from cheap to expensive in IV. I was looking at these over the past week or so and much to my surprise, Natural Gas was making the expensive list.

Now, typically I won't blink twice at an optionable future like Nat Gas, because the liquidity on the options is terrible. Yes, the future is at 7-year lows, and yes it's getting to where the price of the futures are ridiculously priced, but the bids and offers on puts and calls are very wide, and it's sometimes hard to get even the smallest of orders. But thanks to the ever growing list of ETFs, this is all changing. Say hello to my little friend" UNG.

United States Natural Gas, the ETF, is nothing like the Natural Gas futures. Well, it is exactly like the Natural Gas futures, except this EFT seems to be wildly popular, with thousands of contracts that trade every day and even more open interest. While some CNBC panelists and commentators hate the idea of an EFT that trades exactly to Natural Gas, as a trader I love this. Nothing I can't stand more than being right on a physical commodity, and the ETF I am trading that is supposed to mimic that commodity doesn't. Not the case here.

Ok, where am I going with this" Nat Gas hasn't been this low since 2001, and it's quite a value here. I believe this could be the beginning of a long-term bottom being put in place and the careful trader can stand to make a nice chunk of change here. Gas, just like any commodity, cannot go to zero, because nothing is free in this world. Putting together a plan that combines short-term options with owning an ever building portfolio of the asset could be a big hit for a trader who believes that this ETF will rise, and has the patience to ride it out.

Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.