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Energen Beat 2Q16 Expectations: What's Its Secret?

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Part 5
Energen Beat 2Q16 Expectations: What's Its Secret? PART 5 OF 6

What Does Energen’s Implied Volatility Forecast for Its Stock Price?

Energen’s implied volatility

As of August 9, 2016, Energen (EGN) had an implied volatility of ~44.7%, which is ~23.8% below its 260-day historical price volatility of ~58.6%. After earnings were announced on August 8, 2016, Energen’s implied volatility fell from ~47.4% to ~44.7% in one session.

What Does Energen’s Implied Volatility Forecast for Its Stock Price?

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Energen’s 30-day stock price forecast using implied volatility

Assuming normal distribution of prices (bell curve model) and a standard deviation of one, based on its implied volatility of ~44.7%, Energen’s stock is expected to close between $59.52 and $46.00 after 30 calendar days. Based on the standard statistical formula, Energen’s stock will stay in this range ~68% of the time.

Other upstream stocks

As of August 9, 2016, other upstream stocks like Parsley Energy (PE), Gulfport Energy (GPOR), and CONSOL (CNX) have implied volatilities of ~35.8%, ~39.6%, and ~52.5%, respectively. The SPDR S&P 500 ETF (SPY) has implied volatility of ~9.1%.

Implied volatility shows the market’s opinion of the stock’s potential moves, but it doesn’t forecast direction. Implied volatility is derived from the option pricing model. This means the data is theoretical in nature and there is no guarantee these forecasts will be correct.

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