Implied Volatilities of Crude Oil, Natural Gas in Focus



Crude oil’s implied volatility

Crude oil’s (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) implied volatility was 31.6% on August 26, 2016. Its 15-day average implied volatility is 38.5%. That means that crude oil’s current implied volatility is 18% below its 15-day average.

Crude oil’s implied volatility spiked to 56.3% on July 13, 2016. Since then, its implied volatility has fallen 43.9%. From July 13 to date, US crude oil active futures contracts have risen 6.5%. From August 19–26, 2016, US crude oil fell 3%. Its implied volatility fell 4.9% during that period.

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What about natural gas?

Natural gas’s (UNG) (DGAZ) (BOIL) (FCG) (UGAZ) (GASL) implied volatility was 51.9% on August 26, 2016. Its 15-day average implied volatility is 41.4%. This means that natural gas’s current level of implied volatility is 25.4% above its 15-day average.

Natural gas’s implied volatility spiked to 58.7% on May 25, 2016. Since then, it has fallen 11.6%. Since May 25, natural gas has risen 46.3%. Last week, natural gas October futures rose 11.2%, while its implied volatility rose 22.1%.

Energy ETFs

This analysis could be important for natural-gas-tracking ETFs such as the ProShares Ultra Bloomberg Natural Gas (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’s also important for crude-oil-tracking ETFs such as the United States Oil ETF (USO) and the Credit Suisse X-Links WTI Crude ETF (OIIL).


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