What Does Devon Energy’s Implied Volatility Forecast for Its Stock Price?



Devon Energy’s implied volatility

As of August 2, 2016, Devon Energy (DVN) had an implied volatility of ~47.3%, which is ~25.8% below its 260-day historical price volatility of ~63.8%. In the last five days leading into earnings, Devon Energy’s implied volatility rose from ~45.9% to ~47.3%.

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Devon Energy’s 30-day stock price forecast using implied volatility

Assuming normal distribution of prices (bell curve model) and a standard deviation of one, based on its implied volatility of ~47.3%, Devon Energy’s stock is expected to close between $41.02 and $31.22 after 30 calendar days. Based on the standard statistical formula, Devon Energy’s stock will stay in this range ~68% of the time.

Other upstream stocks

As of August 2, 2016, other upstream stocks like Parsley Energy (PE), Gulfport Energy (GPOR), and Energen (EGN) have implied volatilities of ~38.3%, ~44.9%, and ~49.4%, respectively. The SPDR S&P 500 ETF (SPY) has an implied volatility of ~11.1%.

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


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