How to Invest in Uranium
Uranium demand continues to increase as stockpiles decrease.
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The increasing demand for uranium coupled with dwindling supplies presents traders with several investing opportunities. Uranium is a heavy metal that, after being enriched, powers nuclear reactors that produce clean cheap energy. But enriched uranium is also used in nuclear weapons, which explains why uranium trading is very restricted. Investors can trade uranium by investing in mining stocks, exchange traded funds and uranium futures.
How to Invest in Uranium
Step 1Use your online trading account or a free online stock screener to identify publicly traded uranium ore mining companies. You can invest in companies that primarily mine uranium, such as Mega Uranium Ltd. and Cameco Corporation, or a company like BHP Billiton Limited, which mines uranium in addition to other metals. You may want to investigate small-cap uranium ore mining companies.
Step 2Trade the entire uranium market by investing in uranium exchange traded funds (ETF). Uranium ETFs allow investors to benefit from broad market moves while smoothing out uneven individual stock performances. Read the online prospectus before investing in an ETF.
Step 3Consider investing in uranium futures if you have a high tolerance for risk. Uranium futures are traded on the New York Mercantile Exchange, which is operated by the CME Group. Uranium futures have a low initial margin of $2,750 and a maintenance margin of $2,000 per contract. One contract controls 250 pounds of Uranium 308, and the contract value is calculated as 250 pounds multiplied by the market price. Each tick equals $0.05, making a 20-point move worth $1.00.
Step 4Decide which investment product is right for you then log into your trading account. Pull up the chart for uranium and use your chart indications to help find a good trade entry point. Enter the stock or ETF trade using your online account. Let your broker walk you through the trade if you're investing in uranium futures. Check your account screen to determine that it reflects your uranium position. Uranium is known to make unexpected price jumps, so monitor the trade closely.
References
Tips
- Uranium worldwide annual demand is around170 million pounds and dwarfs the 75 million pounds mined yearly. The uranium harvested from nuclear stockpiles is decreasing, which may be setting up a possible future price increase.
Warnings
- Uranium futures carry a double whammy of being thinly traded and very volatile. Only trade uranium futures with money you can afford to lose.
Writer Bio
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.