2024-04-29 04:29:56 ET
Summary
- The ProShares Ultra Bloomberg Natural Gas ETF is a leveraged ETF that tracks the Bloomberg Natural Gas Subindex.
- BOIL is a terrible long-term holding due to negative roll yield and compounding risks.
- However, there is potential for a seasonal rally in natural gas starting in late June, leading to a short-term buying opportunity for BOIL.
- This year, production curtailments from major US natural gas producers and forecasts for a hot summer provide near-term catalysts.
- A calendar call spread offers a more attractive way to trade BOIL through the summer, thanks to the high implied volatility in the calls.
The ProShares Ultra Bloomberg Natural Gas ETF ( BOIL ) is a leveraged ETF designed to produce twice the daily return of the Bloomberg Natural Gas Subindex.
I’ve written about the ProShares Ultra Bloomberg Natural Gas ETF twice in the past year, rating it a Strong Sell late last July in “ BOIL: A Deeply Flawed ETF for Investors ” and in early February this year in “ BOIL: Not a Buying Opportunity .”
In both cases, my caution proved warranted – BOIL is down almost 80% from where it was last July when I issued my Strong Sell rating, and it’s down almost 25% from my last article in February.
Let me be clear about two points:
First, a warning:
BOIL is a terrible long-term investment.
Those looking to buy US natural gas at current depressed levels in anticipation of a longer-term recovery in prices could be absolutely correct about the path of natural gas into 2025 and still lose money, potentially significant money, due to the way this ETF is constructed.
Second, I still see some risk in BOIL near-term; however, the upside and downside risks over the next 3-4 months are more tilted to the upside than when I issued my “Strong Sell” rating back in February and I see the potential for a significant seasonal rally later this summer. So, I am raising my rating on this ETF from Strong Sell to Buy.
Once more, let me underline that this is an intermediate-term trading call, NOT a long-term call on the merits of BOIL. ...
Read the full article on Seeking Alpha
For further details see:
ProShares Ultra Bloomberg Natural Gas: Trading Short-Term Tailwinds (Rating Upgrade)