GAZ Shareholders: You’ve Been Warned. Again

For the uninitiated, $GAZ is a natural gas ETN that trades at a huge premium to its net asset value.   This situation has persisted for several months now, to varying degrees.

I wrote about this situation back at the end of February – but market participants learned the same lesson first hand in $TVIX.

On Friday afternoon, Barclays issued a press release which I read as their way of trying to wash their hands of the entire situation:  they tell you in no uncertain terms that you should not be buying $GAZ.   After a few introductory paragraphs, they get to this, emphasis mine:

“Recently, there has been a persistent and material premium in the trading price of the ETNs on the exchange in relation to  their intraday indicative value. From January 31, 2012 to May 17, 2012, the indicative value decreased by approximately 19% from $3.02 to $2.46 per ETN, while the closing price of the ETNs on the exchange increased by approximately 18% from $3.13 to $3.69 per ETN. The closing price of the ETNs on the exchange as of May 17, 2012 reflected a 50% premium to current indicative value.

Due to likely continued fluctuations in this premium, Barclays believes that the ETNs are currently not suitable for most investors and will not track the price of the underlying natural gas futures index in a consistent manner.

Investors considering any purchase of the ETNs should be aware of the fact that the intra-day market prices of the ETNs on the exchange could be significantly higher than the intraday indicative value of the ETNs as calculated with reference to the level of the underlying index, minus an investor fee.

The secondary market for the ETNs has been volatile and unpredictable, and investors should not assume that the ETNs will continue to trade at a premium in relation to their intraday indicative value.”

Is that clear enough for you?


ps – you can find GAZ’s indicative value here.  Note that on Friday GAZ’s indicative value increased by roughly 7% while GAZ’s share price decreased by roughly 10% – which is to say that the data in the Barclays’ press release is already out of date.

disclosure:  no positions in $GAZ, $UNG, $TVIX


GAZ – The Ultimate Greater Fool Trade

TVIX – You Mess With The Bull, You Get the Horns

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