Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading
ProShares UltraShort Bloomberg Natural Gas ETF (NYSEARCA: KOLD) stock price rallied 13.75% today, giving investors hope that its massive downtrend that started in January was finally coming to an end.
The ETF is short 2X the price of Natural gas, which has been rising since the beginning of the year, which explains its protracted downtrend. The downtrend shows no signs of stopping, given that each rally attempt has been met with excessive selling.
Experts predict that the US will soon be hit by the extremely high natural gas prices in Europe and Asia, where consumers pay costs as high as $30 per million British thermal units (mmBtu) for natural gas while experiencing rampant shortages.
On the other hand, natural gas prices in the US have remained largely unaffected by the rising global prices, with US consumers paying average fees below $6 per million British thermal units (mmBtu) for natural gas.
Experts warn that high demand during the winter season will lead to higher prices despite the US being a major gas producer with most of the gas produced being consumed locally. The US is not a major natural gas export since it has limited export infrastructure.
Meanwhile, the KOLD ETF stock is trading at $6.7 with the projected increase in natural gas prices. Given that KOLD is a short ETF, its price is set to keep falling due to the rising natural gas prices.
However, the price cannot fall below zero, leading to the ETF folding over as it becomes untenable, which is a real proposition given the current trend in gas prices.
Investors holding the ETF may be best served to cash out to avoid shrinking their holdings in value up to zero.
Parts of the US, especially New England and California, are already paying as high as $22 for their winter gas supplies. However, the KOLD stock price decline has been primarily driven by the rising global natural gas prices, placing it at significant risk.
*This is not investment advice. Always do your due diligence before making investment decisions.
ProShares Ultrashort (KOLD) stock price.
ProShares UltraShort (KOLD) stock price was up 13.58% to trade at $6.71, rising from Tuesday’s closing price of $5.86.
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