Natural gas prices can be driven by factors such as weather patterns, storage levels, supply chain disruptions, changing demand for heating and power generation, and other unexpected macro economic events. Natural gas prices are generally more volatile than most other asset classes, including most other commodities, and with increased volatility comes increased risk - but also more opportunities for traders to capitalize on. Large price swings are inherently difficult to forecast accurately, but understanding what happens after a large price movement can offer valuable insight on how to position yourself.
Using historical natural gas futures daily prices from December 31, 2013, to March 31, 2025, we looked at day-over-day price movements of +10% (about three standard deviations) or more, to see if it shows signs of mean reversion/correction the following day. The daily returns following a move of +10% or more had an average of -3.8% and a median -1.66%, indicating strong negative outliers, as shown by the extended and heavier negative tail on the smoothed return distribution. These results imply that large positive price movements are generally followed by a downward move the following day.
Interestingly, this mean-reverting behaviour is not prevalent when analyzing the next day returns after a -10% price movement. The daily returns immediately following a daily return of -10% or lower are more evenly dispersed around 0% without any significant skewness.
Our SavvyLong Natural Gas ETFs; NGUP and NGDN seeks to replicate, to the extent possible, up to two times (2X/-2X respectively) the daily performance of the Solactive Natural Gas Rolling Future index, SOLGAS, which tracks Natural Gas Futures on a rolling basis. Position yourself to benefit from our leveraged Natural Gas ETFs which provide high conviction traders with the ability to benefit from oscillating prices of either direction. Being aware of the cause of the price movements and its factors are essential for a trader’s positioning and outlook.
If you hold leveraged and inverse ETFs for more than one day, your return could vary considerably from the ETF's daily target return. The negative effect of compounding on returns is more pronounced when combined with leverage and daily rebalancing in volatile markets.
Leveraged ETFs are a convenience tool for traders, providing a solution that does not require direct margin from security holders. Trading on the exchange just like a stock means that traders have an easy-to-use solution.
At LongPoint, we saw the gap in the Canadian marketplace for competition in exposures with higher volatility than equity markets and launched the Savvy Geared ETFs that provide either two times long or two times inverse exposure to natural gas and crude oil futures.
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This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy. Any views and opinions expressed do not take into account the particular investment objectives, needs, restrictions, and circumstances of a specific investor and, thus, should not be used as the basis of any specific investment recommendation. Investors should consult a financial and/or tax advisor for financial and/or tax information applicable to their specific situation.