What are natural gas futures?
The Henry Hub Natural Gas futures contract (NG) on the New York Mercantile Exchange (NYMEX) is widely used as a national benchmark price, at 10,000 million British thermal units (mmBtu). The price is based on delivery at the Henry Hub in Louisiana, the nexus of 16 interstate natural gas pipeline systems that draw supplies from the region's prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border. A broad cross-section of companies - from those involved in exploration and production of natural gas to substantial consumers of energy - can use natural gas futures and options contracts to hedge their price risk.
Natural gas futures and options provide individual investors with an easy and convenient way to participate in an essential energy market and trade futures contracts nearly 24 hours per day, 6 days per week. Natural gas futures can see volatile price swings, which can attract speculators hoping to profit on large price moves, but also opens the exposure to large losses as well.
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How to trade natural gas futures
Henry Hub Natural Gas futures contracts are offered through NYMEX on the Globex® trading platform and are available to trade electronically through Schwab nearly 24 hours per day, 6 days per week. In addition to natural gas futures, NYMEX-listed crude oil (CL), heating oil (HO), and unleaded gasoline (RB) futures contracts are available to trade at Schwab. An account approved to trade futures is required in order to trade natural gas futures.
Natural gas futures contract specifications
Considering trading natural gas futures? Here are the natural gas futures contract specifications.
|Exchange, Product Name, Product Code||New York Mercantile Exchange (NYMEX), Henry Hub Natural Gas Futures, NG|
|Contract Size||10,000 mmBtu|
|Minimum Tick Size and Value||0.001, worth $10.00 per contract.|
|Trading Times||Natural gas futures are traded electronically on the Globex® trading platform from 6:00 p.m. U.S. ET until 5:00 p.m. U.S. ET, Sunday through Friday.|
|Principal Trading Months||Primary natural gas futures contracts trade every calendar month, from January through December.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time natural gas futures quotes, and other specialized tools.
Why trade natural gas futures?
The Henry Hub Natural Gas futures contract (NG) is the third-largest physical commodity futures contract in the world by volume and it's widely used as a national benchmark price for natural gas, which continues to grow as a global and U.S. energy source.
Natural gas futures can be used for hedging or speculating and can be traded nearly 24 hours per day, 6 days per week Trading natural gas futures allows hedgers to manage risk within the highly volatile natural gas price, which is driven by weather-related demand.
As natural gas futures are heavily influenced by supply and demand, it's important to understand the factors which can impact the natural gas futures market, most notably extremely hot or cold weather and resulting energy use that could potentially create supply disruptions. Also, discoveries of natural gas fields which can create structural changes in the market.
It is important to understand the benefits and risks involved with natural gas futures before placing a futures trade. Compared to traditional investments, with natural gas futures you can trade outside of the traditional market hours associated with equities and take advantage of trading opportunities regardless of market direction. Natural gas futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like natural gas futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
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