The Forecast Range for Valero Stock until the End of 2017
What is implied volatility?
Volatility is a gauge of how much a stock’s returns changes. When measured based on historical stock prices, it is called historical volatility.
We can also estimate the expected future volatility of a security using an option pricing model, which is called implied volatility. A large implied volatility would indicate that the stock’s price is expected to move more sharply, and hence provide higher positive or negative returns. Conversely, when the implied volatility is small, lower positive or negative returns can be expected for a given period.
Interested in VLO? Don't miss the next report.
Receive e-mail alerts for new research on VLO
Implied volatility in Valero
Implied volatility in Valero Energy (VLO), has fallen 3.2% over July 3, 2017, to the current level of 18.3%. Similarly, implied volatility in Phillips 66 (PSX), HollyFrontier (HFC), and PBF Energy (PBF) fell 3.3%, 2.6%, and 3.1%, respectively, in the same period.
PSX, HFC, and PBF’s stock prices rose 6.0%, 14.8%, and 11.8%, respectively, in the stated period. Currently, implied volatilities in PSX, HFC, and PBF stand at 13.6%, 31.4%, and 34.7%, respectively. So, there seems to be a broad inverse relationship between implied volatility and a stocks’ price.
The SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF (SPY) have also seen a drop in their implied volatilities by 1.2% and 1.6%, respectively, since July 3—the start of 3Q17. Since July 3, DIA and SPY rose 4.3% and 3.1%, respectively. DIA and SPY’s implied volatilities currently stand at 7.1% and 8.3%, respectively.
Likely price range for Valero stock until December 31
Considering VLO’s implied volatility of 18.3% and assuming a normal distribution of prices, a standard deviation of 1, and a probability of 68.2%, Valero stock price could close between $64.20 and $78.10 per share until the end of 2017.