How Volatile Is FMC Technologies?

On August 30, 2016, FMC Technologies (FTI) had an implied volatility of ~33%. Since FTI’s 2Q16 financial results were announced on July 20, 2016, its implied volatility decreased from ~37% to the current level.

Implied volatility (or IV) reflects investors’ views of a stock’s potential movement. However, IV does not forecast direction. Implied volatility is derived from an option pricing model.

Investors should note that the correctness of an implied volatility suggested price can be uncertain. Patterson-UTI Energy’s (PTEN) implied volatility on August 30 was 41.3%—higher than FTI’s.

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