Natural gas futures and implied volatility generally move in opposite directions. For example, on March 3, 2016, natural gas’s implied volatility rose to 53.8%. On the same day, natural gas active futures fell to their 17-year lowest closing price. Since then, implied volatility has fallen 40.5%, and natural gas active futures have risen 85.4%.
In the next seven days, natural gas active futures could close between $2.91 and $3.17 per MMBtu (million British thermal units) with a probability of 68%. This forecast assumes prices are normally distributed based on natural gas’s implied volatility of 32%.
The $3 level
If natural gas futures hold on to the $3 level, it could be positive 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).
For more updates on natural gas prices, read Natural Gas Could Continue to Fall.