Natural gas implied volatility
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%.
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.