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Dr. Daniel Dumitrescu @ CME Group, the most extensive and liquid energy marketplace

 

Part of the CME Group, NYMEX is the most extensive and liquid energy marketplace with an unrivalled product suite and flexible market. Henry Hub Natural Gas (NG) Futures allow market participants significant hedging activity to manage risk in the highly volatile natural gas price, which is driven by weather-related demand. They also provide efficient transactions in and out of positions. Natural gas futures are:

- The third-largest physical commodity futures contract in the world by volume
- Widely used as a national benchmark price for natural gas, which continues to grow as a global and U.S. energy source
- An independent, stand-alone commodity


Things to know about the contracts:

- Natural gas futures prices are based on delivery at the Henry Hub in Louisiana.
- Traded electronically on CME Globex and off-exchange for clearing only as an EFS, EFP or block trade through CME ClearPort. Options types include American, calendar spread, European and daily.

 

With exports growing to Europe, South America and Asia, NYMEX Henry Hub Natural Gas futures (ticker symbol NG) have become the global price benchmark for trading natural gas. Today the contract provides one of the most cost-efficient ways to manage risk in the highly volatile natural gas market.

 

Henry Hub refers to the central delivery location (or, hub) located near the Louisiana’s Gulf Coast, connecting several intrastate and interstate pipelines. Henry Hub has been used as a pricing reference for the futures since April 1990.

 

Comparing NYMEX Henry Hub futures vs. Energy Index ETFs:
- No management fee  Unlike ETFs, pay no annual management fee with NYMEX Henry Hub futures
- Trade around the clock 24 hour-access means no waiting for the ETF open as market-moving events (U.S. elections, weather events and so on ) unfold
- Unparalleled liquidity  3rd largest physical commodity futures contract by volume
- Direct exposure  Many energy index ETFs use NG futures to get market exposure; prices on ETFs may be affected by factors other than change in underlying
- No roll slippage  Avoid the costly loss of correlation to gas market that many ETFs exhibit near the futures roll.

 

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