Natural gas is an abundant fossil fuel created by layers of buried plants and animals being exposed to intense heat and pressure over millions of years. It's primarily composed of methane but can also contain other hydrocarbons such as ethane, propane, butane, and pentane. Advancements in pipeline technology during the 20th century allowed for the mass transportation of natural gas, leading to its widespread adoption as the cost-efficient energy resource of choice.
The Henry Hub natural gas futures contract is one of the most actively traded natural gas futures contracts in the world. The Henry Hub is located in Erath, Louisiana, and is a nexus of several pipeline connections and related infrastructure to deliver and transport natural gas.
Natural gas is a cleaner burning fossil fuel, producing fewer emissions and pollutants than coal or crude oil. Due to its nature, it’s commonly used for heating, electricity generation, and cooking, as well as fuel for many private and public transportation vehicles. It's also a key ingredient in the manufacturing of many important products like plastics, chemicals, and fertilizers.
Natural gas futures trading is an agreement between a buyer and seller at a specified price in a contract that will expire on a specific date. Traders can enter and exit positions any time before one day prior to the expiration date in the physically delivered natural gas contract.
Natural gas futures contracts are tradable instruments for the purchase and delivery of 10,000 million BTUs of natural gas delivered at the Henry Hub natural gas distribution hub in Louisiana. Natural gas futures contracts, like all futures contracts, have a unique set of specifications that are set by the futures exchange.
Natural gas futures are traded on a well-regulated exchange where orders are matched and cleared on a fair and level playing field with full price and order transparency. Traders can place buy and sell orders through their broker to enter or exit a position virtually 24 hours a day in the natural gas futures market.
Yes, NinjaTrader is an industry-leading futures broker offering low commissions, low margin rates, and safety of your account funds. With NinjaTrader, you can trade dozens of the most actively traded futures markets in the world, including natural gas futures.
Economic activity from the global natural gas industry has a significant impact on almost every country in the world as it influences and supports countless essential activities and industries, including electricity generation, heating and cooking, and public transportation. The challenges and costs associated with natural gas exploration, fracking, and transportation make it a dynamic market to trade.
Natural gas futures offer traders direct market access to speculate on the price movement of natural gas. They provide good liquidity virtually 24 hours a day, lower trading capital requirements, and uncorrelated diversification. Natural gas futures can also offer traders more trading opportunities and flexibility over energy stocks and ETFs with their many limitations.
Like every futures contract, the primary risk here is that the price of the natural gas futures will go against the trader’s position. Energy sector news and government reports related to supply and demand, or storage and exploration, can all have a significant effect on the price of natural gas futures.