GAZ Cools Off

The iPath Dow Jones UBS Natural Gas (GAZ) is coming down to Earth a bit, although the premium is still in the clouds. GAZ is almost 20% off Tuesday's highs, when its premium broke above 100% of its net asset value. Currently, it stands around 64%, which is still huge, but it may take a few days to a few weeks to whittle away at the premium -- part of my rationale for using June 10 puts.

A reader suggested buying the shares against the puts, then loaning out the shares to shorts to collect a portion of the interest charged to the shorts. I love this strategy, especially on a hard-to-borrow issue like GAZ, but rates were only in the mid- to upper-8% range, which is basically the same amount I can get for the option. In other words, the option is trading about 8% over intrinsic value due to the time remaining....293 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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