Implied Volatilities: Crude Oil and Natural Gas

Crude oil’s (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) implied volatility was 24.4% on October 14, 2016. Its 15-day average implied volatility is 36%. Crude oil’s current implied volatility is 32.2% below its 15-day average.

Crude oil’s implied volatility rose to 56.3% on July 13, 2016. Since then, its implied volatility has fallen 56.6%. Over this period, US crude oil active futures contracts have risen 12.5%.

From October 7 to October 14, crude oil’s implied volatility fell 25.6%. During this period, West Texas Intermediate crude oil gained 1.1%—as we discussed in Part 1 of this series.

For natural gas (UNG) (DGAZ) (BOIL) (FCG) (UGAZ) (GASL), its implied volatility was 38.4% on October 14, 2016. Its 15-day average implied volatility is 39.7%. Its current implied volatility is 3.1% below its 15-day average.

Its implied volatility rose to 58.7% on May 25, 2016. Since then, it has fallen 34.5%. Since May 25, natural gas has risen 65.9%. Last week, natural gas November futures rose 2.9%, while the implied volatility fell 2.4%.

The analysis could be important for natural gas–tracking ETFs such as the ProShares Ultra Bloomberg Natural Gas ETF (BOIL), the Direxion Daily Natural Gas Related Bear 3X ETF (GASX), the United States Natural Gas ETF (UNG), and the Direxion Daily Natural Gas Related Bull 3X ETF (GASL).

It could also be important for crude oil–tracking funds such as the United States Oil ETF (USO) and the Credit Suisse X-Links WTI Crude ETN (OIIL).