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Why Is Enbridge Energy Partners’ Implied Volatility Elevated?

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Midstream stocks with high implied volatilities

On January 30, 2017, EnLink Midstream (ENLC) had an implied volatility of 39.9%—the highest among the midstream companies in the Alerian MLP ETF (AMLP). EnLink Midstream’s 15-day average implied volatility is 39.1%. Its current volatility is 2% above its 15-day average.

Remember, stocks that see large movements or that are expected to see large movements in the future could have high implied volatilities. We’ll analyze EnLink Midstream’s returns in the next part. We’ll discuss another potential reason for its high implied volatility in the last part of this series.

Below are the other midstream stocks with high implied volatilities as of January 30, 2017:

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  • Enbridge Energy Partners (EEP) – 35.2%, which is 25.8% above its 15-day average
  • NGL Energy Partners (NGL) – 34.9%, which is 7% below its 15-day average
  • Rice Midstream Partners LP (RMP) – 34.2%, which is 3.5% below its 15-day average
  • Western Refining Logistics (WNRL) – 33.7%, which is 7% above its 15-day average

The rise in Enbridge Energy Partners’ implied volatility compared to its 15-day average is the highest among the five midstream stocks with the highest implied volatilities. Notably, on January 27, 2017, the company announced its financial outlook and strategic update. Its implied volatility rose 34.5%. The stock fell 17.6% on the same day because of lower earning guidance.

Midstream stocks with low implied volatilities

Midstream stocks with low implied volatilities on January 30 include the following:

  • Magellan Midstream Partners’ (MMP) implied volatility was 18%—7.5% more than its 15-day average.
  • Enterprise Products Partners’ (EPD) implied volatility was 19.1%—5.3% less than its 15-day average.
  • Tesoro Logistics’ (TLLP) implied volatility was 20%—11.3% less than its 15-day average.
  • Spectra Energy Partners’ (SEP) implied volatility was 20.6%—12% more than its 15-day average.
  • Buckeye Partners’ (BPL) implied volatility was 20.9%—2.6% more than its 15-day average.

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

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