What Was Schlumberger’s 7-Day Stock Price Forecast on April 13?
Schlumberger’s implied volatility
On April 13, 2017, Schlumberger’s (SLB) implied volatility was 22.6%. Since its 4Q16 financial results were announced on January 20, Schlumberger’s implied volatility has increased from 17.1% to the current level.
SLB comprises 3.2% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). You can read what can be expected from Schlumberger’s 1Q17 earnings in Market Realist’s Analyzing Schlumberger’s Earnings prior to Its 1Q17 Results.
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Implied volatility for SLB’s peers
National Oilwell Varco’s (NOV) implied volatility on April 13 was ~35%, while Precision Drilling Corporation’s (PDS) implied volatility was ~50% on that day. McDermott International’s (MDR) implied volatility on April 13 was ~52%.
SLB comprises 0.54% of the SPDR S&P 500 ETF (SPY). SPY tracks the price and yield performance of the S&P 500 Index (SPX-INDEX). The energy sector makes up 6.6% of the SPX-INDEX. The SPX-INDEX increased 12% in the past year versus a 1% rise in SLB’s stock price.
Implied volatility and Schlumberger’s seven-day stock price forecast
Based on Schlumberger’s implied volatility and assuming a normal distribution of stock prices and 1 standard deviation probability of 68.2%, SLB stock could close between $75.71–$80.59 in the next seven days. SLB’s stock price was $78.15 on April 13, 2017.
What does implied volatility mean?
Implied volatility (or IV) reflects investors’ views of a stock’s potential movement. However, IV does not forecast direction. IV is derived from an option pricing model. Investors should note that the correctness of implied volatility–suggested prices can be uncertain.
Energy stocks are typically correlated with crude oil prices. What is SLB’s correlation with the crude oil price? Let’s find out in the next part of this series.