As of August 5, 2016, EOG Resources (EOG) had an implied volatility of ~26.07%, which is ~34.9% below its 260-trading day historical price volatility of ~40.1%. After earnings were announced on August 4, 2016, EOG Resources’ implied volatility fell from ~28.3% to ~26.1% in one trading session.
30-day stock price forecast using implied volatility
Assuming the normal distribution of prices (bell curve model) and a standard deviation of one, based on its implied volatility of ~26.1%, EOG Resources’ stock is expected to close between $96.9 and $83.4 after 30 calendar days. Based on the standard statistical formula, EOG Resources’ stock will likely stay in this range about 68% of the time.
Other upstream stocks
As of August 5, 2016, other upstream stocks like Parsley Energy (PE), Gulfport Energy (GPOR), and Consol Energy (CNX) have implied volatilities of ~35.4%, ~45.1%, and ~50.8%, respectively. By comparison, the SPDR S&P 500 ETF (SPY) has an implied volatility of ~9.2%.
Remember, implied volatility shows the market’s opinion of a stock’s potential movements, but it doesn’t forecast direction. Implied volatility is derived from an option-pricing model. This means that the data is theoretical in nature and that there is no guarantee that these forecasts will be correct.
In the next and final part of this series, we’ll examine EOG’s past stock reactions to earnings results.