Implied volatility for natural gas
Usually, natural gas prices and implied volatility move inversely. In one observation, natural gas’s implied volatility rose to 53.8% on March 3, 2016. On the same day, natural gas active futures fell to their 17-year low. Since then, natural gas prices have risen 82.3%, and implied volatility has fallen 43.5%.
Is $3.10 possible for natural gas?
With a 68.0% probability, natural gas September futures could close between $2.86 and $3.11 per MMBtu (million British thermal unit) in the next seven days, based on normally distributed prices. Here, implied volatility was 30.4%, and the standard deviation was one.
If the current rise in natural gas prices continues, natural gas active futures may reach the $3.10 level. Natural gas futures at the $3.10 level could be important for ETFs such as the First Trust ISE-Revere Natural Gas ETF (FCG), the Direxion Daily Natural Gas Related Bear 3X ETF (GASX), and the Direxion Daily Natural Gas Related Bull 3X ETF (GASL).
Our Thursday’s coverage on natural gas prices could be vital.