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Understanding Natural Gas Futures

Natural Gas Futures

One of the most popular contracts available to trade Natural Gas is CME Group’s NYMEX Henry Hub Natural Gas (NG) Futures. Natural Gas is the world’s third largest physical commodities futures contract & NG futures serve as a global benchmark for this market.

Henry Hub is the most important hub for natural gas in North America. As a nexus for several natural gas interconnections, the delivery point for Henry Hub Natural Gas Futures is located in Louisiana. Featuring an extensive infrastructure including interstate and intrastate pipelines, Henry Hub offers natural gas shippers and marketers ready-to-access pipelines serving markets across the entire United States.

When local markets across the United States price their natural gas, they tend to do so based on a differential to Henry Hub. This differential accounts for regional market conditions, transportation costs and available transmission capacity between locations.

There are many benefits to trading Natural Gas Futures. Watch this 2-minute video to learn more –

Benefits of Trading Natural Gas Futures

  1. Deep Liquid Markets – Traders can get in and out of positions with the third largest physical commodities futures contract in the world by volume. 400K contracts are traded daily, with 1.4M of open interest.
  2. Capital Efficiency – Traders can control a large contract value with a small amount of capital. If used properly, this is a powerful way to increase capital efficiency.
  3. Physical Settlement – NYMEX NG futures are closely connected to the spot market, reducing slippage.
  4. Trading at Settlement – Natural Gas TAS spreads (NGT) are available on NYMEX in any spread combination for the first 12 consecutive monthly contracts.
  5. Global Benchmark – Natural Gas is the world’s third largest physical commodities futures contract, with use growing in South America, Asia and Europe.
  6. Nearly 24-Hour Trading – Natural Gas trade 23 hours a day, 6 days a week. This provides more futures trading opportunities throughout the day.

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