Crude Oil and Natural Gas: Rising Volatility after the Election



Crude oil’s implied volatility

Crude oil’s (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) implied volatility was 37.3% on November 11, 2016. Its 15-day average implied volatility is 36%. Crude oil’s current implied volatility is 3.6% above its 15-day average.

Crude oil’s implied volatility rose to 56.3% on July 13, 2016. Since then, its implied volatility fell 33.7%. During this period, US crude oil active futures contracts rose 3%.

From November 4 to November 11, crude oil’s implied volatility fell 8%. During this period, West Texas Intermediate crude oil fell 1.5%—as we discussed in Part 1 of this series.

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What about natural gas?

For natural gas (UNG) (DGAZ) (BOIL) (FCG) (UGAZ) (GASL), its implied volatility was 58.3% on November 11, 2016. Its 15-day average implied volatility is 51%. Its current implied volatility is 14.4% above its 15-day average.

Its implied volatility rose to 63.4% on October 24, 2016. Since then, it fell 8%. Since October 24, natural gas fell 21.1%. Last week, natural gas futures fell 5.3%—as we discussed in Part 3 of this series. Its implied volatility rose 11.5%.

Energy ETFs

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).


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