Natural Gas Could Regain the $3 Mark Next Week

Rabindra Samanta - Author

Sep. 8 2017, Published 1:20 p.m. ET

Natural gas implied volatility

On September 7, 2017, natural gas’s (UNG) (BOIL) implied volatility was 32%—3.2% above its 15-day moving average.

Natural gas’s implied volatility and prices usually move inversely. In the previous part, we saw a similar case with crude oil and its implied volatility.

In the last four trading sessions, natural gas’s implied volatility rose 0.2%, while natural gas October futures fell 1.9% during this period. On March 3, 2016, natural gas’s implied volatility rose to 53.8%. On the same day, natural gas prices fell to a 17-year low. From March 3, 2016, to September 7, 2017, natural gas prices have risen 81.7%, while the implied volatility has fallen 40.5%.

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Next seven days

In the next seven days, natural gas October futures could close between $2.85 and $3.11 per MMBtu (million British thermal units). The price forecast is based on the following factors:

  • chance of prices closing within this range is 68%
  • prices are normally distributed
  • natural gas’s implied volatility at 32%
  • standard deviation is at one

If natural gas prices move above the $3 mark, it could have a positive impact on ETFs like 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).

Read US Natural Gas: Will It Maintain the $3 Mark? to learn more about natural gas prices.


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