Natural gas’s implied volatility
On June 20, natural gas’s implied volatility was 34.7%—18.8% above its 15-day moving average. The implied volatility has risen ~20.1% in the trailing week, while active futures have fallen 6.7%. Since February, natural gas’s prices and implied volatility have been diverging.
Based on natural gas’s implied volatility of 34.7% and assuming a normal distribution of prices, natural gas futures could close between $2.08 and $2.25 per MMBtu (million British thermal units) 68.0% of the time until June 27. On June 20, natural gas August futures fell 4.3% to $2.166 per MMBtu.
Impact on ETFs, stocks, and the broader market
These price limits could be important for ETFs that follow natural gas futures. In the last week, the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) fell 12.8%, while the United States Natural Gas ETF (UNG) fell 5.8%. These ETFs invest in natural gas futures. If natural gas falls to $2.08, a new multiyear low, UNG and BOIL could be impacted.
Similarly, 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 (SPY) and the Dow Jones Industrial Average (DIA) can also be impacted by changes in energy commodities.