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Energy ETFs Options More Expensive than Energy Stock Options

Jun 12, 2019

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.