Usually, natural gas prices and the implied volatility move inversely. On March 3, 2016, natural gas futures fell to a 17-year low closing price. On the same day, the implied volatility rose to 53.4%. Since then, natural gas prices have recovered 79.9%, while the implied volatility fell 42.7%. In the trailing week, natural gas October futures rose 0.5%. During this period, the implied volatility fell 1.3%.
Assuming that prices are normally distributed, there’s a 68% probability that natural gas active futures could close in the price range of $2.82–$3.05 per MMBtu (million British thermal units) in the next seven days. The calculation is based on natural gas’s implied volatility of 30.6% and a standard deviation of one.
Natural gas above $3
If natural gas prices broke above $3, then 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) could be impacted positively.
For more updates on natural gas, read Natural Gas Could Move above the $3 Mark.