Like oil, natural gas helps power the world. It is pollutes, but significantly less than oil or coal. Natural gas is more abundant than oil; but is also typically found outside the United States. The recent trend is a reduction in demand for natural gas due to the worldwide economic slowdown and over supply.
The Basics of Futures
Futures are contractual agreements to buy or sell a specific financial instrument or commodity at a predetermined price sometime in the future. Futures contracts are standardized and detail the quality and quantity of the underlying asset. They are standardized to simplify trading.
Futures contracts have two positions:
1. Long. This position is the purchaser of the asset. They own the asset and have contractually agreed to sell in the future. They will benefit if the price of the asset increases.
2. Short. This position agrees to buy the asset in the future. If the asset price decreases during the contract term this position benefits.
The Basics of Natural Gas Futures
Natural gas, gold, copper, interest rates, beef and securities are examples of items that can have futures contracts. If the underlying asset is natural gas, then it is identified as a natural gas futures contract.
The Basics of Where to Trade Natural Gas Futures
While some futures are sold on multiple markets with a choice of quantities, natural gas futures are only sold on the New York Mercantile Exchange (NYMEX) in dollars and cents per one million British Thermal Units (mmBtu). They are delivered each month. The ticker symbol is QG.
The Basic of How to Trade Natural Gas Futures
There are three ways to trade futures:
1. You complete your own trades.
2. Your broker trades for you.
3. A group broker trades for the group.