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What Baker Hughes’s Implied Volatility Implies

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Sep. 15 2016, Updated 8:04 a.m. ET

Baker Hughes’s implied volatility

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What does implied volatility mean?

Implied volatility (or IV) reflects investors’ views of a stock’s potential movement. However, IV doesn’t forecast direction. IV derives from an option pricing model. Investors should note that the correctness of implied volatility–suggested prices can be uncertain. Precision Drilling Corporation’s (PDS) implied volatility on September 7 was 53%—higher than BHI’s.

Energy stocks are typically correlated with crude oil price. Has BHI’s correlation with crude oil prices increased? Let’s find out in the next parts of this series.

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