United States GasolineUGA

ETF Research and Analysis

by Paul Justice, CFA
Suitability

Though its tracking is not perfect, the simplest reason to own United States Gasoline UGA is that you believe unleaded gasoline prices are going up. However, keep in mind that this fund will not track spot gasoline prices when the futures curve is behaving abnormally.  Read more 

Bull Case

The fund is an inexpensive option for investing exclusively in gasoline futures, as it levies a modest 0.73% expense ratio.
Though an imperfect gasoline hedge, the fund's approach--buying near-month futures contracts--is better than buying gasoline and paying to store it. Read more 

Bear Case

Gasoline futures, which the fund invests in, can be extremely volatile. In addition, the shape of the futures curve can cause futures returns to deviate from spot price returns. That, in turn, can reduce the fund's effectiveness as a hedge of rising gasoline prices.

Forecasting commodity prices is an inexact science at best. Investors seeking to play gasoline prices opportunistically should be mindful of this reality.
Because this partnership does not make cash distributions, you may have to pay taxes at ordinary income rates out of your own pocket even if you don't sell the fund. Read more 

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