US crude oil implied volatility
On August 3, 2017, US crude oil’s implied volatility was 27%—3.9% below its 15-day moving average.
Usually, oil (USO) (OIIL) (DBO) prices and their implied volatility move in opposite directions. For example, when WTI crude oil futures fell to their 12-year low in February 2016, their implied volatility rose to 75.2%. Since then, oil prices rose 87.1%, while the implied volatility fell 64.1%. On July 28, 2017, US crude oil futures rose 1.4%, while implied volatility fell 1%.
Price range forecast
With a 68% probability, US crude oil active futures could close between $47.21 per barrel and 50.87 per barrel in the next seven days. Assuming that the implied volatility in prices is accounting for any potential action during the OPEC and non-OPEC meeting on August 7–8, 2017, the range could be tested next week. The calculation is based on the following assumptions:
- implied volatility at 27%
- prices are normally distributed
- standard deviation of one
Due to their exposure to energy stocks, these price levels for crude oil are also important for energy ETFs such as the Fidelity MSCI Energy ETF (FENY) and even broader market indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA).