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High Volatility Midstream Stocks for Options Traders


Nov. 23 2016, Published 10:30 a.m. ET

Midstream stocks with high implied volatility

On November 22, 2016, Energy Transfer Equity (ETE) had an implied volatility of 49.6%—the highest among the midstream companies that are part of the Alerian MLP ETF (AMLP). Its 15-day average implied volatility was 48.6%. Its current volatility is 2.2% above its 15-day average.

Stocks that have seen large moves, or are expected to move a lot in the future, can have high implied volatilities. In the next part, we’ll analyze Energy Transfer Equity’s returns.

Now, let’s look at other midstream stocks with high implied volatilities as of November 22, 2016:

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  • Teekay LNG Partners (TGP) – 44.6%, which is 7.9% below its 15-day average
  • EnLink Midstream, LLC (ENLC) – 39.7%, which is 10.2% below its 15-day average
  • Cheniere Energy Partners LP Holdings (CQH) – 38.6%, which is 8.5% above its 15-day average
  • NGL Energy Partners (NGL) – 38.1%, which is 16.3% below its 15-day average

Midstream stocks with low implied volatility

On November 22, 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 18.7%. Its 15-day average implied volatility was 20.5%. Its current implied volatility is 8.5% below its 15-day average.

Let’s look at some other midstream stocks with low implied volatilities as of November 22, 2016:

  • Buckeye Partners (BPL) – 19.3%, which is 13% below its 15-day average
  • Spectra Energy Partners (SEP) – 19.5%, which is 12.4% below its 15-day average.
  • Enterprise Products Partners (EPD) – 23%, which is 9.8% below its 15-day average
  • Valero Energy Partners LP (VLP) – 23.2%, which is 29.6% below 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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