Natural Gas Futures Explained: NG, MNG, QG and What Each Move Is Worth

Key takeaways

Natural gas futures quote dollars per MMBtu, an energy unit. NG represents 10,000 MMBtu, MNG 1,000 and QG 2,500. A $0.10-per-MMBtu move represents $1,000, $100 and $250 respectively for one contract, before costs.

NG and MNG use $0.001 price steps, worth $10 and $1 per tick. QG uses a $0.005 step, worth $12.50. Compare the same price distance when evaluating exposure.

Ten MNG or four QG match the energy-unit exposure of one NG. Notional exposure, required margin and planned trade loss measure different things; a planned stop does not guarantee an exact exit.

NG is physically deliverable; MNG and QG are financially settled under their own rules. Check current calendars, earlier account deadlines and the EIA release schedule, including holiday exceptions.

Full transcript

A ten-cent move, three contract sizes

A move from three dollars to three dollars and ten cents looks small on a price chart. In one standard Henry Hub natural gas futures contract, that ten-cent move represents one thousand dollars before costs.

In a Micro contract, the same move represents one hundred dollars. In an E-mini contract, it represents two hundred and fifty dollars.

Same price change. Different contract sizes. Different dollar consequences.

This is Know the Contracts from Nigel Kavor. In this video, we will explain what Henry Hub natural gas futures represent, how to read their prices, and what to check before treating a chart movement as a manageable trade.

The prices and trades in our worked examples are invented. They explain the mechanics, not a trading strategy or a record of actual performance.

Natural gas and Henry Hub

Natural gas is an energy source used for heating, electricity generation, and industrial activity. It is different from the gasoline used in a car, and it is different from crude oil. An energy-market label does not make these products interchangeable.

Henry Hub is a natural gas delivery location near Erath, Louisiana. Its name identifies the physical reference behind this particular futures benchmark. It does not mean that every natural gas transaction, in every location, takes place at the Henry Hub price.

The standard futures contract trades on NYMEX, part of CME Group. Its product code is N G. Micro Henry Hub natural gas uses M N G. E-mini natural gas uses Q G. We will compare these three futures contracts. Options and other natural gas products have their own specifications.

Understanding the energy unit

First, understand the unit.

These contracts quote natural gas in dollars per million British thermal units. A British thermal unit measures energy. The abbreviation M M B t u means one million British thermal units. It is an energy unit, not a barrel or a share.

Reading the quote

An invented price of three dollars means three dollars per million British thermal units. It does not mean the entire futures contract costs three dollars.

Contract quantities

One N G contract represents ten thousand of those units. One M N G contract represents one thousand. One Q G contract represents two thousand five hundred.

Price changes and dollar results

To translate a price change into dollars, multiply the change in the quoted price by the contract size and the number of contracts. For a long position, an increase produces a gain and a decrease produces a loss, before costs. A short position reverses that direction.

Return to our example: three dollars to three dollars and ten cents. The difference is ten cents per unit.

Ten cents multiplied by ten thousand units equals one thousand dollars for one standard contract. Multiply by one thousand units for the Micro, and the amount is one hundred dollars. Multiply by two thousand five hundred units for the E-mini, and it is two hundred and fifty dollars.

If the same long positions instead move from three dollars to two dollars and ninety cents, those amounts become losses before costs. The size of the contract does not change because the trade moves against you.

Ticks and price steps

Now distinguish a common price change from one tick.

For the outright standard N G contract, the minimum price increment is one thousandth of a dollar per unit. That increment multiplied by ten thousand units gives a ten-dollar tick.

The Micro also uses a one-thousandth increment. With one thousand units, its tick is one dollar.

The E-mini uses a five-thousandths increment. Multiply that by two thousand five hundred units, and one tick is twelve dollars and fifty cents.

So the E-mini has a smaller contract size than the standard, but a larger dollar value for one tick. That is possible because a tick is a different-sized price step in the two products.

Compare a common price change

For a fair exposure comparison, use the same price distance. A one-cent move is ten standard ticks, ten Micro ticks, or two E-mini ticks. Before costs, it represents one hundred dollars, ten dollars, or twenty-five dollars for one contract, respectively.

Quantity and exposure

Quantity belongs in the calculation too. Ten Micro contracts represent the same total number of energy units as one standard contract. Four E-mini contracts also reach that total. That matches exposure to a common price change; it does not make their order books, costs, fills, or settlement arrangements identical.

Notional, margin and profit or loss

At our invented three-dollar price, one standard contract has thirty thousand dollars of notional exposure. The Micro has three thousand dollars, and the E-mini has seven thousand five hundred dollars.

Notional exposure, margin, and trade loss answer different questions.

Notional describes the scale represented at that price. Margin is funds required to support a futures position. A trade's profit or loss depends on the price movement, contract size, quantity, and costs.

Check current exchange requirements and your broker or account provider's rules. A lower amount required to open a position does not change the contract's dollars per price move, and it does not establish an affordable loss.

Planned distance and execution

Suppose an invented long entry is three dollars, with a planned stop at two dollars and ninety-five cents. The planned distance is five cents per unit.

That distance represents five hundred dollars for one standard contract, fifty dollars for one Micro, or one hundred and twenty-five dollars for one E-mini, before costs and differences in the actual exit.

A stop order does not guarantee that exact loss. Execution conditions matter. Rapid movement, unavailable liquidity, or a trading interruption can prevent an exit at the intended price.

Weather, supply and demand

The physical market also helps explain why natural gas deserves its own preparation.

Cold weather can increase demand for heating. Hot weather can increase electricity demand for air conditioning, including electricity generated using natural gas. Production, storage, pipeline constraints, and imports and exports also affect the balance of supply and demand.

These relationships provide context. They are not automatic instructions to buy when it is cold or sell when it is warm. A weather story by itself does not establish a trading edge.

The EIA storage report

One scheduled information source is the U.S. Energy Information Administration's Weekly Natural Gas Storage Report. It reports estimates of working natural gas in underground storage.

Its standard release is Thursday at ten thirty in the morning, Eastern Time. Holiday exceptions can change the day or time, so check the current E I A schedule. If you trade through an account provider, check its announcement restrictions as well.

Knowing when information is released helps you prepare. It does not tell you which direction price will move or what execution will be available.

Dated contracts and settlement

Next, check the contract month and expiration.

Natural gas futures have dated contracts. Two different delivery months are different contracts and can trade at different prices. A continuous chart is a viewing tool; identify the actual product, month, and year attached to your order.

Standard N G is physically deliverable under the exchange's rules. Delivery concerns natural gas at Henry Hub and requires the relevant arrangements. It is not a feature to ignore simply because you intend to trade a chart.

The Micro and E-mini are financially settled products linked to the corresponding Henry Hub contract under their own rules. Financial settlement does not remove their expiration dates or make them interchangeable with the standard contract.

Expiration calendars

The standard's trading termination rule refers to the third business day before the first day of the delivery month. The Micro and E-mini stop trading one business day before the corresponding standard contract. Use the exchange's current calendar for the exact date, including applicable holiday provisions. Your account provider may require you to exit earlier.

Rolling a position

Rolling a position means closing exposure in one dated contract and opening exposure in another. Those are transactions, with prices and costs. Switching the month displayed on a chart does not move an existing position.

Trading schedules, holiday hours, price limits, and account permissions also need checking. An available quote does not guarantee that your chosen order will fill at that price.

The contract checklist

Before trading one of these products, identify the exact contract and month. Confirm the unit, multiplier, and tick increment. Calculate the dollars represented by your planned price distance and quantity. Then check costs, execution conditions, scheduled reports, margin rules, and the deadline for leaving the contract.

The central calculation is simple: price change, multiplied by contract size, multiplied by quantity. The judgment is whether the resulting exposure fits your plan and whether the plan itself deserves your confidence.

Knowing the contract helps you understand what a trade means. Evidence is still needed to judge whether the approach is worth following.

Next: Euro FX Futures

Read the euro-dollar quote and compare pips, ticks and dollar exposure for 6E, M6E and E7.