uploads///IV Midstream

Midstream Stocks with High and Low Implied Volatility


Dec. 4 2020, Updated 10:53 a.m. ET

Midstream stocks with high implied volatility

On November 14, 2016, Sunoco Logistics Partners (SXL) had an implied volatility of 69.7%, the highest among midstream companies that are part of the Alerian MLP ETF (AMLP). Its 15-day average implied volatility was 33.6%. Its current volatility is 107.4% above its 15-day average.

IV Midstream

On November 4, 2016, Sunoco Logistics Partners (SXL) declared its quarterly financial results, which could be fueling its implied volatility. In the next part, we’ll analyze Sunoco Logistics Partners’ returns.

Now, let’s look at other midstream stocks with high implied volatilities as of November 14, 2016:

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  • Energy Transfer Equity (ETE): 48.8%, which is 3.8% above its 15-day average
  • NGL Energy Partners (NGL): 48.5%, which is 7.6% above its 15-day average
  • Teekay LNG Partners (TGP): 48.5%, which is 1.1% above its 15-day average
  • Cheniere Energy Partners LP Holdings (CQH): 48.3%, which is 33.2% above its 15-day average

Yesterday, on November 14, 2016, the Army Corps of Engineers indicated that the Dakota Pipeline construction requires “additional analysis and discussion” with the Standing Rock Sioux tribe. These comments could increase the uncertainty around the fate of the Dakota Access Pipeline project, which could affect Energy Transfer Equity (ETE) and Sunoco Logistics Partners (SXL) and could further fuel their implied volatilities. ETE is the general partner of Energy Transfer Partners (ETP).

Midstream stocks with low implied volatility

On November 14, 2016, Magellan Midstream Partners (MMP) had the lowest implied volatility among all of the midstream companies that are part of AMLP. The company’s implied volatility was 20.4%. Its 15-day average implied volatility was 20.6%. Its current implied volatility is 1.1% below its 15-day average.

Let’s look at some other midstream stocks with low implied volatilities as of November 14, 2016:

  • Buckeye Partners (BPL): 23.9%, which is 11.3% above its 15-day average
  • Spectra Energy Partners (SEP): 24.6%, which is 16.2% above its 15-day average
  • EQT Midstream Partners (EQM): 25.1%, which is 0.7% above its 15-day average
  • Enterprise Products Partners (EPD): 25.8%, which is 5.3% above its 15-day average

A pattern that emerges from the above figures is that the companies with lower implied volatilities are the ones with strong parent companies or the ones who are strong players in the industry themselves.

In the next part of this series, we’ll look at the returns of midstream stocks with high and low implied volatilities.


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