Natural gas’s volatility

On November 22, 2017, natural gas’s implied volatility was 41%—approximately 3.7% below its 15-day average.

Analyzing the Downside for Natural Gas Next Week

Although natural gas (GASL) (GASX) and its implied volatility have shared an inverse relationship in the past, the two seem to be dropping in tandem due to the slow meltdown in prices—compared to the sharp drops that gas usually experiences.

Sharp movements in a security, in any direction, can cause its volatility to rise. Usually, drops tend to be sharper in financial markets. Sharp spikes in prices can cause the implied volatility to rise, while slow drops can cause the volatility to fall.

Price forecast

On November 24–30, natural gas active futures could close between $2.89 and $3.23 per MMBtu (million British thermal units) with a probability 68%. For this, we assume that prices are normally distributed. We also considered natural gas’s implied volatility of 41% and a standard deviation of one.

On November 22, 2017, natural gas active futures settled at $3.059 per MMBtu. ETFs like the United States Natural Gas Fund LP (UNG), the ProShares Ultra Bloomberg Natural Gas (BOIL), and the First Trust ISE-Revere Natural Gas ETF (FCG) could see weakness because of their direct relationship with natural gas prices if the energy commodity falls below the $3 level.

Read Natural Gas: More Downside Risk? to learn more about natural gas prices.

Latest articles

Apple (AAPL) investors have had a roller coaster week. Apple stock has lost just under 2% in a week, ending on August 23, 2019.

Competition taking a toll on Netflix as its share of US subscription video streaming market keep falling as rivals gain ground.

Crude oil production continues to rise, and oil prices remain at $50. Despite that, US energy stocks aren’t getting investors’ interest.

Apple stock fell 4.6% as the US-China trade war intensified today. China warned of tariffs on more US goods, followed by Trump's tweeted response.

In response to new tariffs from China and President Trump's tweets, the market tanked to session lows on Friday. The DJIA nosedived more than 600 points.

Coverage on Cresco Labs has increased from seven analysts in July to nine in August. Six analysts favor a “strong buy,” and three recommend a “buy.”