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Midstream Stocks: How Returns Impact Implied Volatility

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Midstream stocks with high implied volatilities

EnLink Midstream Partners (ENLC) rose 157% in the past year as of February 27, 2017. It has the highest implied volatility of all the midstream companies that make up the Alerian MLP ETF (AMLP). In the past five days, EnLink Midstream rose 1.3%.

The above table shows the one-year and trailing-five-day returns of the stocks we identified as having high and low implied volatilities in the previous part. As you can see, high volatility stocks moved sharper than low volatility stocks in the past year.

While EnLink Midstream has risen the most among the midstream stocks with high implied volatilities in the past five days, NGL Energy Partners (NGL) has fallen the most. NGL Energy Partners saw the largest rise in its implied volatility compared to its 15-day average, as we saw in the previous part.

Crestwood Equity Partners (CEQP) has risen the most in the past year among the list of midstream stocks with the highest implied volatilities. In the past four quarters, Crestwood Equity Partners’ revenue fell 7%, while its operating profit fell 19.6%. Its operating profit margin is 4.9%—compared to the industry median of 4.3%.

Teekay LNG Partners (TGP) has risen the least among the midstream stocks with the highest implied volatilities in the past year. In the past four quarters, Teekay LNG Partners’ revenue rose 2.3% and its operating profit rose 28.8%. Teekay LNG Partners’ operating profit margin is 48.4%.

Returns of midstream stocks with low implied volatilities

Among the midstream stocks with the lowest volatilities, Tesoro Logistics (TLLP) has fallen the most in the last five days. On February 22, 2017, the stock fell 5.4%. On February 21, 2017, Tesoro Logistics announced the pricing related to its public offering of 5,000,000 common units.

In the next part of this series, we’ll look at the midstream stocks with the highest short interest-to-equity float ratios.

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