uploads///RRC Q Post Implied Volatility

Range Resources’ Implied Volatility Forecast for Its Stock


Aug. 3 2016, Updated 9:05 a.m. ET

Range Resources’ implied volatility

As of July 27, 2016, Range Resources (RRC) had an implied volatility of ~43.8%, which is ~33.9% below its 260-trading-day historical price volatility of ~66.3%. After earnings were announced on July 26, 2016, the company’s implied volatility increased from ~43.4% to ~43.8% in one session.

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Range Resources’ 30-day stock price forecast using implied volatility

Assuming normal distribution of prices (bell curve model) and standard deviation of one, based on its implied volatility of ~43.8%, Range Resources stock is expected to close between $45.56 and $35.40 after 30 calendar days. Based on the standard statistical formula, Range Resources stock will stay in this range ~68% of the time.

Other upstream stocks

As of July 27, 2016, other upstream stocks such as Encana (ECA), Gulfport Energy (GPOR), and Diamondback Energy (FANG) have implied volatilities of ~57.0%, ~44.8%, and ~33.3%, respectively. The SPDR S&P 500 ETF (SPY) has an implied volatility of ~11.0%.

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


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