Natural Gas Funds and Contract “Rolls” – What You Need to Know
- Timothy Beggans
- Jul 24
- 2 min read
Natural gas ETFs like UNG, UNL, BOIL, and KOLD don’t hold physical gas. Instead, they track NYMEX futures, requiring a monthly “roll” to avoid physical delivery. Understanding this process is key for navigating volatile energy markets.
🔁 What Is a “Roll”?
A roll involves selling expiring near-month futures and buying longer-dated contracts. This is essential to avoid delivery—but it can erode returns in contango, where later-dated contracts are pricier.
🗓️ When Do Funds Roll?
Most natural gas ETFs roll mid-month, about two weeks before contract expiration:
UNG: Rolls over 4–5 business days in the second week, e.g., September to October.
UNL: Maintains a 12-month ladder. Each month, it sells the expiring contract and adds a new one 12 months out.
BOIL/KOLD: Follow UNG’s mid-month roll but rebalance daily to maintain 2x/-2x exposure—suitable for short-term trading only.
📉 Contango’s Drag
Contango erodes returns. UNG’s 10-year annualized return is -23.14%. UNL mitigates this (-5.09%) through broader exposure but with weaker spot price tracking.
🔎 Outlook: August/September 2025
The September 2025 (NGU25) contract expires August 27. Expect ETF rolls August 11–15, shifting into October. These rolls often impact near-term volatility. EIA reports U.S. storage at 3,052 Bcf (as of July 11), 6.2% above the 5-year average but 4.9% below 2024. Tight inventories + potential heatwaves or hurricanes may influence roll strategies and price action.
⚡ Why It Matters
Rolling affects ETF performance and market dynamics. Monitoring storage, weather, and LNG demand (up 2.7% YoY per IEA) is crucial for positioning.
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