Natural gas’s implied volatility
At 29.6%, natural gas’s implied volatility was 9.5% less than its 15-day moving average. Like crude oil prices and their implied volatility, which we discussed in the previous part, natural gas (FCG) (BOIL) prices and their implied volatility usually share an inverse relationship.
For example, on March 3, 2016, US natural active futures settled at their 17-year low. On the same date, their implied volatility was 53.8%. Since then, natural gas prices have recovered 81.1%, and their implied volatility fell 45%.
Natural gas’s price forecast
Assuming prices are normally distributed, there is a 68% probability that natural gas active futures could settle between $2.85 and $3.09 per MMBtu (million British thermal units) next week. This takes into account natural gas’s current implied volatility of 29.6% and a standard deviation of 1.
Based on the current fundamental trend, natural gas could break back above the $3.00 level in the next few trading sessions. It could be a positive development for the ETFs such as the United States Natural Gas ETF (UNG), the Direxion Daily Natural Gas Related Bull ETF (GASL), and the Direxion Daily Natural Gas Related Bear 3X ETF (GASX).
Our coverage on natural gas could help you understand the fundamentals driving possible changes in natural gas prices.