Natural Gas Could Reach the $3.4 Mark Next Week

Rabindra Samanta - Author

Nov. 20 2020, Updated 10:38 a.m. ET

Implied volatility

On November 9, 2017, natural gas had an implied volatility of 43.5%—9.4% more than its 15-day average.

Natural gas (GASL) (GASX) prices and implied volatility are usually inversely related. On March 3, 2016, natural gas active futures fell to a 17-year low closing, while the implied volatility was at 53.8%. Since then, the implied volatility has fallen 19.1%, while natural gas prices have risen 95.2%.

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Natural gas prices in the next seven days

Based on the implied volatility of 43.5% and a standard deviation of one, natural gas active futures could settle between $3­ and $3.4 per MMBtu (million British thermal units). The model is based on the assumption of a normal distribution of prices. The period for this price range is the next seven days with a probability of 68%.

On November 9, 2017, natural gas active futures settled at $3.2 per MMBtu—6% below the $3.4 mark.

If natural gas prices rise more, it could be a positive development for 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). These ETFs are supposed to track natural gas futures.

Read Natural Gas: Will the Bullish Sentiment Continue? to learn more about natural gas prices.


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