3 Must Know ETFs For Hurricane Isaac

Hurricane Isaac has made landfall in Louisiana, forcing the evacuation of 3,000 residents of Plaquemines Parish earlier today. With winds up to 80 miles per hour, Isaac has already caused rampant flooding in a state still trying to recover from tragedies left by Hurricane Katrina. For now, it appears Isaac has not wrought similar carnage on New Orleans as Katrina did, but Isaac still has the potential to have a say in select corners of the financial markets.

As Isaac moves inland, the storm loses strength and wind speeds decline. That should give Louisiana officials a chance to assess any damage done to important oil and natural gas production and transportation systems. In advance, investors can consider Isaac plays with the following ETFs:

U.S. Natural Gas Fund (NYSE:UNG) The U.S. Natural Gas Fund is a predictable destination for traders looking to make a play on tropical storms in the Gulf of Mexico. However, UNG has thus far disappointed as an Isaac play. Even with a 2.4 percent gain on Wednesday, the fund is off 1.4 percent since Monday. On Tuesday, natural gas futures, which UNG tracks, closed at the lowest level in two months.

UNG's slack performance this weeks indicates the better Isaac gas play might be..

United States Gasoline Fund (NYSE:UGA) In advance of the Labor Day holiday, UGA was already on the upswing, but Isaac-related refinery closures have sent the price of unleaded gas rocketing higher. To that end, UGA has also been a tad disappointing this week with a gain of less than one percent.

That said, UGA is up 10.6 percent this month, but the play here might be to wait or day or two and look for an entry to short this fund. Not only does UGA look overbought, the ETF could be vulnerable to a pullback if Isaac does not hamper refinery output to the degree that some market observers previously speculated. UGA could be hit by another factor: Isaac could force travelers to cancel vacation plans this weekend. That would mean a near-term decline in gasoline demand and bad news for UGA.

iPath DJ-UBS Cotton TR Sub-Index ETN (NYSE:BAL) Quiet as it has been kept, the iPath DJ-UBS Cotton TR Sub-Index ETN has surged 7.7 percent in the past month, but volume has been mediocre, indicating there is little conviction in the ETN's rally. However, BAL could get a major boost if Isaac damages the Mississippi Delta crop.

That is a big "if" and if it does not come to pass, BAL will be left vulnerable to selling pressure. If damage is to the U.S. cotton crop is minimal ,traders could turn their attention back to China. China is expected to release nearly 1 million tons of cotton from state-owned reserves, implying demand there will cool this year, according to OptionsExpress.

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