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Option Traders: High Implied Volatility Midstream Stocks


Dec. 21 2016, Updated 10:18 a.m. ET

Midstream stocks with high implied volatilities

On December 20, 2016, Teekay LNG Partners (TGP) had an implied volatility of 44.7%—the highest among the midstream companies that make up the Alerian MLP ETF (AMLP).

Teekay LNG Partners’ 15-day average implied volatility is 41.8%. Its current volatility is 6.8% above its 15-day average.

Stocks that saw large movements or that are expected to see large movements in the future can have high implied volatilities. In the next part, we’ll analyze Teekay LNG Partners’ returns.

For now, let’s look at other midstream stocks with high implied volatilities as of December 20, 2016:

  • Energy Transfer Equity (ETE) – 44.1%, 3.4% below its 15-day average
  • NGL Energy Partners (NGL) – 43.8%, 5.8% above to its 15-day average
  • Enable Midstream Partners (ENBL) – 38%, 0.9% below its 15-day average
  • Rice Midstream Partners (RMP) – 36.9%, 0.7% below its 15-day average
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Midstream stocks with low implied volatilities

On December 20, 2016, Magellan Midstream Partners (MMP) had the lowest implied volatility among all of the midstream companies that make up AMLP. The company’s implied volatility was 13.7%. Its 15-day average implied volatility was 19.4%. Its current implied volatility is 29.3% below its 15-day average.

Let’s look at some other midstream stocks with low implied volatilities as of December 20, 2016:

  • Enterprise Products Partners (EPD) – 18.1%, 26.9% below its 15-day average
  • EQT Midstream Partners (EQM) – 18.7%, 21.5% below its 15-day average
  • ONEOK Partners (OKS) – 20%, 21.6% below its 15-day average
  • Buckeye Partners (BPL) – 20%, 2.1% below its 15-day average

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

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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