Claymore GAS Performance

gemma119 said:

Today Natural Gas reached $3.57 and Claymore ETF GAS is $5.52. I bought Claymore GAS on July 23/09 for $6.45 when Natural Gas was $3.57. I thought this was going to mirror the Natural Gas price itself. Any thoughts on this?

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Interesting. I'll dig around and report back on what I find. I personally don't invest in commodity ETFs.

Just a possibility - don't know. I think the futures contracts roll over around the middle of the month. At that time they have to buy 'forward' and I understand that forward prices are A LOT HIGHER right now. Investors lose the difference in prices when that happens. Find out whether they buy near-term contracts or staggered longer term ones. The different funds do it differently.

Assuming GAS actually buys futures which I believe they do... just on the Canadian prices. Then you've enjoyed buying less for more and discovering somewhat how these investments work... or more to the point don't work for the average investor.

Simple example:

You have 100 dollars you own 10 contracts bought for $10 each. Now the contracts are rolled over to the next month you still have your $100, but now the contracts are $12... you no longer own 10 contracts but 8 1/3 (if you could buy thirds). So now the price has to increase exponentially for you to keep up. Long story short don't buy and hold futures based funds during contango... especially not when the curve is/was this bad.

Live and learn.

i believe that if investor owns 10 contracts that he bought @ $10, he now holds close to $120 in the simple example. If today's one-month future costs $12, then his 10 maturing contracts are also worth very close to $12.

I recommend people don't buy things they don't understand. The time to do due diligence is before you buy not after. The objective of GAS is "to track the performance of the benchmark NGX Canadian Natural Gas Index, less fees and expenses." It is meeting its objective PERFECTLY for the time period you identified. Both the NGX Canadian Natural Gas Index and the Claymore GAS ETF have returned about -2.5% since the day you bought the Claymore ETF. The ETF is performing like they said it would.

The problem with the benchmarks being used to 'justify' ETFs is that the benchmarks are being created AFTER the mechanics of the ETF are devised. The benchmark may NOT track what the investor THINKS the ETF is tracking based on its 'blub'. The system has got turned around. It is the index that tracks the ETF's performance. Not the other way around.

Leslie. Give your head a shake. You are making something relatively simple into something complicated. The ETF tracks the benchmark index.

humble_pie said:

i believe that if investor owns 10 contracts that he bought @ $10, he now holds close to $120 in the simple example. If today's one-month future costs $12, then his 10 maturing contracts are also worth very close to $12.

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Apparently my example wasn't simple enough... you don't get it. I hope you stick to GICs.

resource investor said:

Leslie. Give your head a shake. You are making something relatively simple into something complicated. The ETF tracks the benchmark index.

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Another dense post like the other guy wasn't bad enough, lol. In a proper world the ETFs would be created to track existing "benchmark" indexes, but in this world indexes are indeed fabricated after the fact as Leslie stated. Get with the times RI.

Mogul. The NGX Canadian Natural Gas Index (the Alberta “one-month spot” physical market price) has been calculated each afternoon at 2:30pm since 1997. What do you mean it is fabricated after the fact?

resource investor said:

Mogul. The NGX Canadian Natural Gas Index (the Alberta “one-month spot” physical market price) has been calculated each afternoon at 2:30pm since 1997. What do you mean it is fabricated after the fact?

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There's a difference between the spot price and this index. This index actually started December 19, 2007. The ETF February 6, 2008. There is no relevance to the index itself, it's a simple rolling month calculation. It's the daily spot pricing you are referring to which has indeed been around for years.