Quick answer: Futures contracts are standardized, exchange-traded agreements to buy or sell natural gas at a set price and future date. They are the most transparent and liquid hedging instrument, with central clearing that reduces counterparty risk — though they require margin and remove upside.

What are natural gas futures?

Futures lock in a price for a set quantity and delivery month on an exchange such as NYMEX, referencing benchmarks like Henry Hub. They are a core instrument in natural gas hedging and among the financial derivatives used to manage price risk.

How do futures hedge risk?

A producer sells futures to lock in a selling price; a buyer buys futures to lock in a cost. Gains on the futures offset losses on the physical position, stabilizing the net result.

What are the trade-offs?

Futures are transparent, liquid, and centrally cleared, reducing counterparty risk, but they require margin and remove favorable price moves, and leave residual basis risk. Mobius Risk Group's hedge strategy solutions help firms use futures effectively.

Frequently asked questions

What is a natural gas futures contract?

A standardized, exchange-traded agreement to buy or sell gas at a set price and delivery month, referencing a benchmark like Henry Hub.

Why use futures to hedge?

They are transparent, liquid, and centrally cleared, making them a low-counterparty-risk way to lock in prices.

What are the downsides of futures?

They require margin, remove upside, and leave basis risk between the benchmark and the delivery point.