Natural gas’s implied volatility
On December 27, natural gas’s implied volatility was 66.2%, which was ~15.7% below its 15-day moving average. In the trailing week, natural gas’s implied volatility fell 11.6%. Natural gas February futures rose 0.6% during the same period. Since June, these two metrics have been moving in tandem.
Natural gas prices and the weather forecast
Based on natural gas’s implied volatility of 66.2% and assuming a normal distribution of prices, natural gas futures are expected to close between $3.24 and $3.85 per MMBtu 68.0% of the time until January 4.
On December 27, natural gas February futures rose 2.5% to $3.546 per MMBtu. The weather forecast suggests slightly colder weather in the next ten days.
Impact on ETFs and stocks
These price limits could be important for ETFs that follow natural gas futures. In the trailing week, the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) fell 10.4%. Natural gas prices rose 0.6% during the same period.
Natural gas–weighted stocks Antero Resources (AR), Cabot Oil & Gas (COG), Southwestern Energy (SWN), and Chesapeake Energy (CHK) have risen 0.8%, 6%, 6.4%, and 20.1%, respectively, in the trailing week. These stocks outperformed other natural gas–weighted stocks in the trailing week.