What are Natural Gas Futures?

Natural Gas futures CFDs are highly sought after by traders thanks to its volatility and seasonal predictability. Over the last decade, Natural Gas companies have gone from working in domestic markets to global ones, grabbing the attention of traders as new growth opportunities present themselves.

This is due in part to growing demand from developing countries, the bolstering of global infrastructures, and the advancement in Natural Gas liquefaction technologies.

To take advantage of the growing Natural Gas Futures market, Plus500 offers traders the opportunity to go long or short on this commodity by trading CFDs, without needing to purchase the underlying asset.

Natural Gas Futures

Natural Gas is a commodity that must be prospected, extracted, and refined in order for it to be consumed by purchasers. This lengthy process demands a large upfront investment by Natural Gas producers.

In order to ensure that they will be able to sell the gas at a profit, Natural Gas producers create contracts with a distributor or another company that provides consumers with Natural Gas at a set rate. The agreement states that a buyer will purchase a set amount of one million British thermal units (MMBTU) of gas for a fixed rate, to be paid at a later date.

Each contract is worth 10,000 Million British Thermal Units (MMBTU) so if someone needs 50,000 MMBTU, they will need to buy 5 contracts. These contracts can then be traded on the Chicago Mercantile Exchange (CME) by traders aiming to profit from the estimated value of the contract on its expiration date.

Plus500 offers traders the opportunity to trade CFDs on the value of Natural Gas Futures. With CFDs, traders can trade Natural Gas’ volatility using leverage and without having to purchase the underlying asset.

Popular options screen in mobile view

Natural Gas Futures vs. Natural Gas Futures CFDs

Louisiana, USA’s Henry Hub acts as the industry’s pricing benchmark. All Natural Gas trade contracts in the underlying market are based on the price from this location.

When purchasing a contract for 10,000 MMBTU directly on the CME, a buyer may be called upon to accept the delivery and store it. This is difficult for a buyer because they generally 1) Do not have the means to store Natural Gas and 2) Do not want to incur the cost of transportation and storage of this commodity.

There are many benefits in trading Natural Gas Futures CFDs.

Trading CFDs with Plus500 allows you to trade this commodity using leverage, increasing your purchasing power while raising exposure to the market’s volatility. This means that traders can use the same amount of capital and incur more profits, however may equally incur greater losses. In addition, Plus500 offers an automatic rollover service, which means that open positions and orders are automatically rolled-over to the next futures contract.

It’s important to remember that trading CFDs has its benefits, but there are significant risks involved as well. (To learn more about CFDs, and its risks, have a look at our Trader’s Guide).

Why Trade Natural Gas CFDs?

Natural Gas has proven to be a powerful energy source for industries and residential consumers alike. The increased demand has caught the attention of CFD traders who are looking to be exposed to this commodity’s seasonal volatility while trading with leverage.

Growing markets and increased demand may have an effect on Natural Gas’s valuation, bringing with it fluctuations and opportunities over time.

1A screen capture of the Plus500 platform, as of September 2020. Illustrative prices.
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