A Natural Gas ETF to Play Contango

NEW YORK (TheStreet) -- The JPMorgan Alerian MLP Index ETN (AMJ)(AMJ) offers investors exchange traded exposure to the natural gas marketplace without the problems of United States Natural Gas(UNG).

Although AMJ is less of a "pure play" on natural gas prices than UNG or even First Trust ISE-Revere Natural Gas(FCG), it's much more predictable over the long term.

AMJ's investors gain access to the natural gas market through the stocks of companies that store and transport natural gas, many of which are structured as Master Limited Partnerships. While this exchange traded product comes with the risks of exchange traded notes, it is large and liquid, allowing investors to trade in and out of the fund with relative ease.

The companies that AMJ tracks are well diversified businesses involved in natural gas pipeline and storage. According to the fund's fact sheet, the top five holdings in the fund are Kinder Morgan Energy Partners(KMP), Enterprise Products Partners(EPD), Plains All American Pipeline(PAA), Energy Transfer Partners(ETP)and Energy Transfer Equity(ETE).

These firms are a sort of "tax collector" as natural gas passes through the system, taking a toll even when natural gas prices are low. Natural gas is currently in huge supply at low prices. Eventually this price discrepancy, along with cold weather, hurricanes, or other typical drivers, will push consumers toward natural gas.

UNG's structure aims to track natural gas prices at the risk of contango , while AMJ tracks MLP's at the risk of issuer J.P. Morgan. AMJ is a collection of debt notes, rather than equity, which exposes the fund to the credit risk of its issuer. AMJ was originally launched by Bear Stearns under the symbol BSR, but changed its symbol when J.P. Morgan took over and relaunched the index on June 2, 2009.