NGH4, 700C, six month history of implied volatility vs. underlying futures price, most recent markers are for Mon Jan 27 close.
It's too early for a post-mortem because the patient is alive ... HE'S ALIVE! ... but in the coming days it will be interesting to see if mean reversion will occur. FYI, the IV was bid at least as high as 126% on Sunday night/early Mon a.m. before I went to bed. It settled Monday (same trading day) at 105%.
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To clarify, this is the IV for a 700C. The mean for the ATM IV is significantly lower.
The recent IV mean of 46% for a strike this far out of the money is kind of high over the last three years (2012 NG price plunge excepted), but it's low over a longer trading history. NG is famous for its volatility, probably the most volatility someone can get on an exchange-traded product. (For even more volatility I think you need to go to the over the counter energy and power markets.)
I'll address your other post later today - the one about long term analysis of HV and IV.
As for the chart above, it's from the Personal Professional version of Quikstrike. I subscribe to Personal Standard and am in a trial for Pro. Pro has some very nice features which are hard to find elsewhere but it's also $300/mo vs. $100/mo for Standard.
Did you see volume today? Feb traded only 15,000 lots. With the new rules positions have to be so small going into expiry that any issue at all can cause a significant price swing. ICE volume was almost 3x as much as NYMEX in Feb.
Not sure if its related but ICE had an exchange issue for about 5 mins at approximately 13:30 EPT with their Henry Hub contract. Not sure what would have happened if they hadn't had that issue.
For what its worth physical prices are up 50c in the supply area's, so this wasn't purely an expiration squeeze. If it was physical prices would not have risen in line.
Last edited by SMCJB; January 29th, 2014 at 05:03 PM.
Good point. With HH cash at a significant premium to Feb futures it seems like something had to give by 2:30 pm ET today. I'm sure there were some games, along with some panic buying, but unless NG futures are way different than most other futures contracts, cash and futures are supposed to converge near and at delivery date.