What Are Natural Gas Futures & How To Trade Them
Tuesday, October 8, 2024Natural gas futures (/NG) are among the most actively traded energy contracts, driven by seasonal demand, weather patterns, storage data, and geopolitical supply factors. This guide covers how to trade natural gas futures on tastytrade, including contract specifications, key fundamental and technical drivers of /NG prices, margin requirements, and position sizing strategies.
What Are Natural Gas Futures and How Do They Work?
Natural gas futures—like all futures—are derivative products that allow traders to buy or sell standardized contracts. In this case on the CME, that represents a certain quantity of natural gas on a specific future date.
The delivery location for natural gas futures is the Henry Hub in Erath, Louisiana. When someone talks about U.S. natural gas prices, they are referring to the Henry Hub futures.
The hub is connected to eight pipelines, three intrastate pipelines, and storage hubs. This integrated infrastructure makes the Henry Hub an efficient pricing benchmark for the U.S. market.
As the expiration date approaches, the price of natural gas futures converges with the spot price. Consequently, the Henry Hub natural gas futures price effectively determines the transaction price at the hub.
Retail traders use natural gas futures to speculate on the price of the commodity, which is influenced by supply and demand, geopolitical events, and weather forecasts to name a few.
Producers and utilities trade natural gas futures to lock in prices, hedge against volatility, and manage costs.
What Natural Gas Futures Can I Trade?
Natural gas futures give traders access to one of the world’s most-traded commodities. The award-winning* tastytrade platform lets you trade several different natural gas futures.
Whether you're a seasoned trader or just beginning your journey in the futures market, we offer various natural gas futures products with different contract sizes and settlement methods to suit your needs.
Henry Hub Natural Gas
- Symbol: /NG
- Contract Unit: 10,000 MMBtu
- Tick Size: 0.001
- Tick Value: $10
- Settlement: Physical
- Options Available: Yes
- Symbol: /QG
- Contract Unit: 2,500 MMBtu
- Tick Size: 0.005
- Tick Value: $12.50
- Settlement: Financial
- Options Available: No
- Symbol: /MNG
- Contract Unit: 1,000 MMBtu
- Tick Size: 0.001
- Tick Value: $1
- Settlement: Financial
- Options Available: No
Natural Gas Futures Trading Hours
Natural gas futures trade nearly 24 hours a day, six days a week. Trading for the week starts at 6:00 p.m. Eastern Time (ET) on Sunday and ends at 5:00 p.m. on Friday. There is a 60 minute break each day beginning at 5:00 p.m.
Trade Natural Gas Futures With Low Commissions
At tastytrade, commissions are competitive. Futures contracts are $1 to open and $1 to close. Micro futures contracts are $0.75 to open and $0.75 to close.
How to Trade Natural Gas Futures
First, open an account on tastytrade. Then, research the market to understand why prices are trading where they are. Focus on fundamentals and implied volatility to gain insights into market sentiment and potential price movements.
Decide which natural gas futures product is suitable for your risk tolerance. E-mini Natural Gas (/QG) and Micro-Henry Hub (/MNG) are available for smaller account sizes. Once you're ready, you can then open, monitor, and manage your position.
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This content, including the use of actual symbols, any visual display or other reference to product, type of investment, strategy, or service offered, is for educational purposes only. It is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person. You are solely responsible for making your own investment and trading decisions and for evaluating relevant factors, including their investment experience, objectives, financial situation, and risk tolerance prior to trading.
Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable for all investors. Please read the Futures & Exchange-Traded Options Risk Disclosure Statement prior to trading futures products.
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