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Energy ETFs Options More Expensive than Energy Stock Options

Jun 12, 2019

 

Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels
Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels

 

Implied Volatility Data for Energy ETFs

Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
United States Oil Fund LP USO 37.66 35.07 82.14% 77.18% 32.54% 79.37%
SPDR S&P Oil & Gas Exploration & Production ETF XOP 34.87 33.65 76.19% 78.17% 40.08% 46.43%
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares GUSH 103.36 97.4 76.19% 78.57% 29.76% 51.98%
VanEck Vectors Oil Services ETF OIH 35.04 33.61 75.79% 78.57% 37.70% 52.38%
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares DRIP 106.57 107.46 73.81% 78.17% 23.02% 49.60%
United States Gasoline Fund, LP UGA 35.47 36.02 72.62% 79.76% 47.22% 93.65%
Direxion Daily Natural Gas Related Bull 3X Shares GASL 91.5 84.81 68.65% 65.87% 25.00% 37.30%
United States Natural Gas Fund, LP UNG 29.44 30.37 63.49% 64.29% 51.59% 73.81%
The Energy Select Sector SPDR Fund XLE 20.09 20.34 62.30% 64.68% 26.19% 70.24%
Direxion Daily Energy Bear 3X Shares ERY 62.05 63.49 61.90% 63.49% 39.68% 77.78%

 

  • As a follow-up to our note Energy Options Expensive with Fall In Crude Oil Prices. Chevron Notable Outlier from yesterday, we take a look at implied volatility trends for energy ETF options.
    • It is interesting to see is that implied volatility and risk premiums in energy ETFs are even richer than those for energy stocks.
      • Suggests that there might be a lot of hedging occurring at the “macro level” with ETFs rather than at a ”micro level” with stocks.
         
  • While United States Oil Fund ETF (USO) 30-day options are expensive in terms of implied volatility, it is surprising that risk premiums for those options are “relatively” narrow.
    • Trader’s takeaway: Implied volatility isn’t as expensive as it looks with the price volatility of USO so high.
    • USO has a “BUY” trading signal. 
       
  • Energy Select Sector ETF (XLE) options are the most attractive to “buy” right now with implied volatility slightly above historical averages and risk premiums so cheap.
    • Remember, you can “buy” both Calls and Puts  you can own options to make bets on whether XLE will rise or fall.
    • XLE has a “BUY trading signal. 

 

 

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