Returns of midstream stocks with high implied volatilities
As we saw in the previous article, Energy Transfer Equity (ETE) had the highest implied volatility among the midstream companies that are part of the Alerian MLP ETF (AMLP). ETE has risen 17% on a YTD (year-to-date) basis, but it’s fallen 4.7% in the last five days.
Below are the returns of some of these high implied volatility midstream stocks on a YTD basis:
- Teekay LNG Partners (TGP) – 19.8%
- EnLink Midstream (ENLC) – 21.3%
- NGL Energy Partners (NGL) – 63%
- Enable Midstream Partners (ENBL) – 71.2%
Here are the five-day returns for these stocks:
Returns of midstream stocks with low implied volatilities
As we saw in the previous part of this series, Columbia Pipeline Partners (CPPL) had the lowest implied volatility among all of the midstream companies that make up AMLP as of December 5, 2016. Below are the returns of Columbia Pipeline Partners and other midstream stocks YTD:
- Columbia Pipeline Partners (CPPL) – -1.6%
- Magellan Midstream Partners (MMP) – 2.8%
- Spectra Energy Partners (SEP) – -9.3%
- Buckeye Partners (BPL) – -5.2%
- Enterprise Products Partners (EPD) – -0.1%
Now let’s look at the five-day returns for these stocks:
- Columbia Pipeline Partners (CPPL) – 0.3%
- Magellan Midstream Partners – -0.3%
- Spectra Energy Partners (SEP) – -4.3%
- Buckeye Partners (BPL) – -3.6%
- Enterprise Products Partners (EPD) – -1.5%
The returns show that on a broad level, high implied volatility stocks moved more sharply than low implied volatility stocks. Stocks that move sharply, or are expected to move sharply, exhibit higher implied volatilities.
In the next article, we’ll take a look at midstream stocks’ short interest-to-equity float ratios.