Analyzing Implied Volatility for Crude Oil and Natural Gas

Crude oil’s implied volatility

Crude oil’s (USO) implied volatility was 33.31 on May 27, 2016. The 15-day average is at 39.16. The current implied volatility is 15% below its 15-day average. It spiked to 47.99 on May 16—its highest level in May 2016. Since then, the implied volatility fell 30.6% to date.

Analyzing Implied Volatility for Crude Oil and Natural Gas

What about natural gas?

For natural gas (UNG), the implied volatility was 41.97 on May 27, 2016. The 15-day average is at 46.35. The current implied volatility is 9.4% below its 15-day average. It spiked to 58.71 on May 24—its highest level in May 2016. Since then, the implied volatility fell 28.5% to date.

Comparing the implied volatility

For natural gas, the implied volatility is higher than crude oil’s implied volatility. The above graph shows natural gas and crude oil’s implied volatility in May.

Energy stocks

The above analysis could be important for upstream stock such as Abraxas Petroleum (AXAS), Triangle Petroleum (TPLM), Gulfport Energy (GPOR), and Comstock Resources (CRK). In the next part of this series, we’ll look at some key macroeconomic indicators for crude oil.