The Forecast for Andeavor’s Stock Price through December 29
What is implied volatility?
Volatility shows how much a stock’s returns change in a given period. When calculated based on historical stock prices, this metric is called historical volatility. The expected future volatility can be estimated using an option pricing model, which is called implied volatility.
A larger implied volatility reading indicates that the stock’s price is expected to move more steeply, giving higher positive or negative returns. Conversely, when the implied volatility is smaller, lower positive or negative returns can be expected for a given period.
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Price range forecast for Andeavor stock
Let’s look at the forecast price range for Andeavor stock for the 28-day period ending December 29, 2017. Implied volatility in Andeavor has fallen from 21.5% on October 2, 2017, the beginning of 4Q17, to the current level of 20.9%.
Considering ANDV’s implied volatility of 20.9%, we’ll assume a normal distribution of prices, a standard deviation of 1, and a probability of 68.2%. Under these conditions, Andeavor’s stock price could close between $98.40 and $110.50 per share in the 28 days ending December 29, 2017.
Implied volatilities in ANDV’s peers
Implied volatility in PBF Energy (PBF) has fallen 3.1% to the current level of 33.8%. Also, implied volatilities in HollyFrontier (HFC) and Delek US Holdings (DK) have fallen 4.5% and 7.4%, respectively, since October 2. Currently, HFC and DK have implied volatilities of 30.0% and 32.5%, respectively.
The SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF (SPY) have seen an increase in their implied volatilities since October 2. DIA and SPY have implied volatilities of 11.3% and 8.4%, respectively.
In the next part, we’ll consider the changes in analysts’ ratings for Andeavor in 4Q17.