Natural gas’s implied volatility

On May 10, natural gas’s implied volatility was 22.5%, which is ~1.3% above its 15-day moving average. The implied volatility was almost constant in the last week, while active futures have risen 2%. Since February, natural gas’s implied volatility and futures prices have been diverging.

Key Price Levels for Natural Gas This Week

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Price forecast

Based on the implied volatility of 22.5% and assuming a normal distribution of prices, natural gas futures are expected to close between $2.55 and $2.69 per MMBtu 68.0% of the time until May 17. On May 10, natural gas June futures rose ~0.9% to $2.62 per MMBtu.

Impact on ETFs and energy 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) and the United States Natural Gas (UNG) rose 2.3% and 4.8%, respectively. If natural gas rises further, it will benefit these commodity-tracking ETFs. UNG and BOIL track natural gas futures contracts.

Moreover, natural-gas-weighted stocks like Southwestern Energy (SWN), Chesapeake Energy (CHK), Range Resources (RRC), and Antero Resources (AR) are sensitive to changes in natural gas prices. Broader market indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) can also be impacted by changes in energy commodities.

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