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DEFINITION of 'Natural Gas ETF'

Exchange-traded funds (ETFs) that invest in natural gas futures and other products in an effort to closely track the price of delivered natural gas at market. Natural gas ETFs are set up as commodity pools, which issue limited partnership interests as opposed to shares. The fund may also invest in heating oil, crude oil and gasoline futures.

BREAKING DOWN 'Natural Gas ETF'

Natural gas ETFs (and those of other natural resources/commodities) opened well when they first began trading on the American Stock Exchange (AMEX). Having a more liquid way to access natural gas as both a speculative and hedging play is very useful to both retail and institutional investors. Investors should expect small tracking errors over shorter time frames, but see strong correlation to the spot price of natural gas over medium and longer time horizons.

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