# Horizons Natural Gas Yield ETF (HNY)



## Value (Jul 31, 2015)

Quick question, 

Hello all, newly registered on the board yesterday btw.

This might be a newb question but how do the people at Horizons manage to pay such a yield on this product?

From the site : 

_*HOLDINGS --- % of NAV

United States Natural Gas Fund LP ---- 66.72%
Horizons NYMEX® Natural Gas ETF ---	35.04%
Natural Gas Based Options
United States Natural Gas Fund LP 07/17/2015 $13.50 US* ---0.23%
United States Natural Gas Fund LP 07/17/2015 $14.00 US* ----0.40%
Cash, Margin and Currency Hedging
Cash, Cash Equivalents, Margin and Net Other Assets--- -1.12%
Total (NAV $13,677,978) 100.00%
* Marked to Market value of the Option position *_

Basically, do they day trade on the United States Natural Gs Fund and the Horizons NYMEX???

How does it work?

Thanks y'all


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## andrewf (Mar 1, 2010)

Pulled from their site:

The investment objectives of Horizons HNY are to provide unitholders with: (i) exposure to the price of natural gas futures hedged to the Canadian dollar, less the ETF’s fees and expenses; (ii) tax-efficient monthly distributions; and *(iii) in order to mitigate downside risk and generate income, exposure to a covered call option writing strategy*.

So, it sounds like they are using a covered call strategy to generate income. My advice is to stay away from this product. Never buy something because of the yield it generates. Total return is the only thing that matters, and I see no evidence that is fund will be delivering any.


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## james4beach (Nov 15, 2012)

As andrewf says: total return is what matters, don't go for something just because of its yield.

High yielding investments have been "fooling" Canadian investors for several years now. Here's a great example that illustrates this... the bank ETFs. We have regular bank ETFs (ZEB and XFN) and then a covered call ETF (ZWB) which basically holds BMO's ZEB and then writes covered calls "for extra income".

Everyone seemed to think the covered call version, ZWB, would have higher returns because it's creating additional income with the calls. Or at least would fare better in market downturns. And now we can look back and see how ZWB is doing. How are those covered calls working out?

iShares banks (XFN): 1 yr 1.76%, 3 yr 15.71%
BMO banks ETF (ZEB): 1 yr -0.20%, 2 yr 14.36%, 3 yr 13.46%
*BMO banks covered calls (ZWB): 1 yr -0.23%, 2 yr 11.66%, 3 yr 11.86%*

ZWB is consistently doing worse, both in the bad years and the good. The most relevant comparison is between ZEB and ZWB because they basically hold the same thing and the options strategy is what distinguishes them. ZWB is performing worse by −1.6% annualized over 5 years.

As you can see here, the "covered calls" don't necessarily add any additional performance. They may make it worse.


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## Value (Jul 31, 2015)

Sorry to get back to you so far after your initial post (help)... ¸
I have put this on hold for now... But I do not fully understand how this ETF works...
Furthermore, you can see the share price has been systematically going down. 

If the price of Natural gas was at 3 dollars MMBtu in 2013, it was worth more in 2013 than it would be in 2015...

Why is that? Is it because of the value of the currency or is it because they are considerably loosing money with their strategie and wasting whatever excess with dividend??

I'm just looking for something to simply replicate the value of natural gas... A huge dividend while I wait for prices to recover is just a bonus, but not exactly what I am looking for.


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## Value (Jul 31, 2015)

Thinking about it, this found looses money whenever the price of Nat Gas recovers... Because it is bound to sell the shares at a predetermined price...

So in a down market, instead of loosing 100%, they might loose say 70-90%, but in return when in a bull market, they may gain 50% rather than 100%?

The only market where this can win is in a stable one where they just take in the premium of the covered call without change to the underlying assets??

That`s pretty crappy indeed... 

Let me know if I got it right or not please.


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