November 15, 2018 / 1:50 PM / 7 months ago

NYMEX natgas futures volume and implied volatility hit all-time highs

Nov 15 (Reuters) - U.S. natural gas futures volume and implied volatility on the New York Mercantile Exchange (NYMEX) hit all-time highs on Wednesday after the front-month contract soared more than 36 percent over the past four days on colder weather forecasts.

CME Group Inc, which owns the NYMEX, said total futures volume rose to a preliminary record high of 1,602,673 contracts on Wednesday, topping the previous high set on Tuesday of 1,232,635.

Tuesday's high surpassed the previous record of 1,022,858 contracts set on Jan. 12, the CME said.

Traders said the combination of colder forecasts and the low amount of gas in storage going into the winter heating season brought a return of volatility that resembled the gas market of old.

Implied volatility, a determinant of an option's premium, rose to a record high of 98.6 percent, according to Reuters data going back to 2007.

The increases in volume and volatility came after the front-month contract jumped to its highest since 2014 on Wednesday on forecasts for much colder weather than previously expected in November.

The cold forecast convinced many in the market that the record amount of gas coming out of the ground would not be enough to shrink a vast 16 percent storage deficit in November as previously projected. The amount of gas in storage at the end of October was the lowest since 2005.

Implied volatility has been on the rise since September after holding at very low levels between March and August. Implied volatility fell to a record low 19.2 percent in late July.

Since September, gas futures have traded up or down more than 3 percent eight times, compared with just one time from March to August and 13 times in January and February.

Implied volatility has averaged 36.4 percent since it started rising in September, up from just 26.0 during the first eight months of the year. That compares with an average of 37.0 in 2017, 38.9 during the prior five-years (2013-2017) and 49.4 in the previous five years (2008-2012).

That increased volatility boosted interest in NYMEX futures. CME said open interest in its Henry Hub gas benchmark has hit at least 10 open interest records since August, reaching an all-time high of 1,699,571 contracts on Oct. 4.

Reporting by Scott DiSavino; Editing by Bernadette Baum

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