Natural gas’s implied volatility
On May 17, natural gas’s implied volatility was 20.6%, 0.5% higher than its 15-day moving average.
Between May 10 and May 17, natural gas June futures rose 1.6%, and implied volatility rose 0.5%. Since March, these two variables have broadly diverged.
Between May 18 and May 25, with a 68% probability, natural gas futures could close between $2.78 and $2.93 per MMBtu (million British thermal units) based on natural gas’s implied volatility of 20.6% and assuming a normal distribution of prices.
On May 17, natural gas June futures rose 1.6% and settled at $2.86 per MMBtu. Given the recent bullish momentum, the week leading up to May 25 could see natural gas prices rise above the $2.9 mark.
Impact on ETFs and stocks
The above price limits could be important for ETFs that follow natural gas futures, such as the ProShares Ultra Bloomberg Natural Gas ETF (BOIL). In the trailing week, BOIL rose 3.9%, 2.3 percentage points more than natural gas’s rise during the same period.
During this period, Chesapeake Energy (CHK), Southwestern Energy (SWN), Gulfport Energy (GPOR), and Range Resources (RRC) rose 28.1%, 7.4%, 7.2%, and 6.2%, respectively, and were the largest gainers on our list of natural gas–weighted stocks.