Crude Oil and Natural Gas: Analyzing Implied Volatilities

Crude oil’s implied volatility

Crude oil’s (USO) (OIIL) (USL) (SCO) implied volatility was 28% on January 6, 2017. Its 15-day average implied volatility is 27.7%. Crude oil’s current implied volatility is 0.9% above its 15-day average.

Crude Oil and Natural Gas: Analyzing Implied Volatilities

Crude oil’s implied volatility rose to 47.9% on November 11, 2016. Since then, its implied volatility fell 41.6%. During this period, US crude oil active futures contracts rose 17.8%. From December 30 to January 6, crude oil’s implied volatility rose 1.6%. During this period, West Texas Intermediate crude oil rose 0.5%, as we discussed in Part 1 of this series.

What about natural gas?

Natural gas’s (UNG) (DGAZ) (BOIL) (FCG) (UGAZ) (GASL) implied volatility was 47.3% on January 6, 2017. Its 15-day average implied volatility is 50.2%. Its current implied volatility is 5.8% below its 15-day average.

Natural gas’s implied volatility rose to 56.2% on November 14, 2016. Since then, it has fallen 15.9%. Since November 14, natural gas has risen 19.9%. Last week, natural gas futures fell 11.5%. Earlier in the week, natural gas prices fell due to higher temperature forecasts that could impact gas’s winter heating demand. Its implied volatility fell 8.1% in the week.

Energy ETFs

The previous 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).