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OFS Stocks: Why Implied Volatility and Short Interest Matter

PART:
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Part 2
OFS Stocks: Why Implied Volatility and Short Interest Matter PART 2 OF 3

OFS Stocks: Analyzing Returns and Implied Volatilities

OFS stocks with high implied volatilities

As of April 5, 2017, Tidewater (TDW) fell 85.2% over the past year. Tidewater has the highest implied volatility of all the OFS (oilfield equipment and services) constituents of the VanEck Vectors Oil Services ETF (OIH). In the past five trading days, Tidewater stock fell 20.2%.

OFS Stocks: Analyzing Returns and Implied Volatilities

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The above table shows the one-year and five-day returns of the stocks we identified as having high and low implied volatilities. Generally, high implied volatility stocks fell significantly or moved more drastically than low implied volatility stocks. In the past five days, Superior Energy Services (SPN) was the only gainer among the OFS stocks with high implied volatilities, while Seadrill (SDRL) lost the most during this period.

On April 4, 2017, Seadrill announced plans to restructure its credit after reaching a deal with its banks. On the same day, the stock fell 55.7%.

On April 5, 2017, Tidewater announced that it’s in the process of restructuring its debt with creditors. However, the company hasn’t asked for any extension for previous waivers that expired on March 27, 2017. On the same day, the stock fell 13.4%.

Tidewater fell the most in the past year. In the past four quarters, Tidewater’s revenue fell 40.7%. Its adjusted operating loss was $39.7 million in 4Q16—compared to $0.10 million in 4Q15. Its operating profit margin is -18.3%.

Returns of OFS stocks with low implied volatilities

TechnipFMC (FTI) was the only loser in the past year among low implied volatility OFS stocks. In the past four quarters, TechnipFMC’s revenue fell 23.5%. It reported negative diluted EPS (earnings per share) of $0.05 in 4Q16—compared to diluted EPS $0.24 in 4Q15.

Remember, sharp moves and high short interest can cause high implied volatility in a stock. In the next part of this series, we’ll look at the OFS stocks with the highest short interest-to-equity float ratios.

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