Natural gas’s implied volatility
On April 5, 2018, natural gas’s implied volatility was 21%—9.5% less than its 15-day moving average.
In the seven calendar days to April 5, 2018, natural gas May futures fell 2.1% with a 6.3% fall in the implied volatility. Since September 2017, the two variables have mainly moved together.
On April 6–12, 2018, with a 68% probability, natural gas futures could close between $2.61 and $2.74 per MMBtu (per million British thermal units)—based on natural gas’s implied volatility of 21% and assuming that the prices are normally distributed.
On April 5, natural gas May futures settled at $2.68 per MMBtu. Given natural gas’s recent pullback and a possible fall to $2.61, ETFs like the United States Natural Gas ETF (UNG) and the ProShares Ultra Bloomberg Natural Gas (BOIL) could also fall. On March 29—April 5, 2018, natural gas futures fell 2.1%. These ETFs’ returns during this period were:
- UNG fell 2%.
- BOIL fell 4.3%.