UNG (United States Natural Gas Fund, LP) as a Short

I explored the case for going long “natty gas” on January 20th, 2012. I now believe there are good reasons to sell/short the UNG vehicle for the following reasons (note that shorting anything is always and everywhere a dangerous activity):

• UNG is, by design, not a “buy and hold” vehicle.
• There appears to be forced and uneconomic buying among some commodity participants (e.g., I haven’t the word ‘Amaranth’ in a while). That suggests a perfect storm of opportunity, given patience (and cash).
• This is one where, in my view, you do not ‘stop loss’ if it goes higher… you add more.
• Volatility is one of the few quantities in markets that is inherently mean-reverting (though there is a ‘clustering’ effect as well).