So long story short, I bought in at 8.20, and within 48 hours it was at $9.25. My target sell price was $9.50, but I had to bank the gain to offset a capital loss by the end of 2014, so I ended up selling at $9.00. I wanted to hit my target price, so I bought back immediately and hoped to ride it a little bit higher.
So those of you that have been following know that UGAZ has had a complete and utter collapse in the past month. It has been ugly. I have continually averaged down as the price as dropped, but I'm in a dangerous spot right now.
This was a really simple minded investment when I first got in. I thought that the initial drop was an overreaction from warmer winter temps, and once we had a chilly week with bad forecasts it would go back up. That was a completely false assumption, and supply and demand concerns have crippled UGAZ. The US is producing oil and natural gas at record rates right now.
As of today, UGAZ is $2.74.
I'm sitting on an average of $6.75, so it would have to more than double for me to break even. I'm crossing my fingers that it goes up next week with colder temps, but I've seen that even a week of blizzards can't make this thing go up. I was down 15k within 2 weeks of buying this piece of crap.
I bought most of my shares on margin. I've paid back some, but owe about $25k of margin on my $37,000 investment. I'm paying about $200 of interest per month on this debt.
Some would say that I should just hold into next winter and hope the situation shakes out. The issue with this is that UGAZ is a 3x leveraged ETN that suffers from decay.
I haven't been able to find any calculations on decay, or easy way of find out what it could be over the long term, but I know it's there. I'm not sure if it's as severe, but I kind of relate it to the rake in a poker game. The longer you stay in, the more money comes off the table.
One article I read said that the decay can cost an investor as much as 30% over a year in extreme cases. This ETN has such wild swings that it could be one of those extreme cases.
I would appreciate advice from anyone with experience with decay, leveraged ETNs, and the short and long term future of natural gas.
I've lost over $20k on a $37,000 invest in just the past month and half, and I'm desperate for advice right now. I'm really stubborn to sell, because then I would have no shares, no hope, and a $20k margin bill to pay off.
Thanks in advance. Jokingly, I probably should have stuck with sports betting this season instead at this point. The 20 grand would have lasted longer.