Integrated Energy and Refiner Stocks with High Implied Volatility



High implied volatility

As of October 27, 2016, Calumet Specialty Products Partners (CLMT) had the highest implied volatility among integrated energy and refining companies we’re reviewing in this series. The stock’s volatility figures are as follows:

  • implied volatility – 73.4%
  • 15-day average implied volatility – 72.2%
  • current volatility – ~1.6% higher than its 15-day average

In comparison, the implied volatilities of other integrated energy and refining stocks as of October 27 are as follows:

  • Alon USA Partners (ALDW) – 56.3%, or ~21.2% less than its 15-day average
  • Alon USA Energy (ALJ) – 56.2%, or 12% less than its 15-day average
  • CVR Refining (CVRR) – 53.7%, or ~16.7% less than its 15-day average
  • Petrobras (PBR) – 50.3%, or ~3.2% less than its 15-day average

Alon USA Partners saw its implied volatility rise to 133.2% on October 24, 2016. On October 26, 2016, Alon USA Partners announced its 3Q16 financial results. In the last three trading sessions, its implied volatility fell ~57.7%. The rise in implied volatility ahead of its 3Q16 results indicates market participants’ expectations for a sharp move in its unit prices. In the next part, we’ll discuss the price movement in Alon USA Partners.

Article continues below advertisement

Petrobras (PBR) agreed to settle a lawsuit related to corruption in the company with Pacific Investment Management, Dodge & Cox, Al Shams Investments, and Janus Capital, according to the Wall Street Journal report on October 24, 2016. It cost shareholders billions of dollars in losses. Petrobras still has many more individual lawsuits and a class-action lawsuit pending against it related to the corruption scandal.

Overall, the weak refining environment and the volatility in oil and refined product prices can cause volatility in energy companies. The refiners listed above are among the smaller refining companies in the US. They have concentrated operations compared to their larger peers.

Low implied volatility

As of October 27, ExxonMobil (XOM) has the lowest implied volatility figure among our list of integrated energy companies and refiners. Below are its volatility figures:

  • implied volatility – 17.4%
  • 15-day average implied volatility – 17.8%
  • current implied volatility – 1.4% less than its 15-day average

Now, let’s look at some other integrated energy companies and refiners with low implied volatilities as of October 27:

  • Chevron (CVX) – implied volatility of 19.7%, or 0.2% higher than its 15-day average
  • Royal Dutch Shell (RDS.A) – implied volatility of 21.7%, or 7.5% less than its 15-day average
  • Total SA (TOT) – implied volatility of 22%, or 7% less than its 15-day average
  • Phillips 66 (PSX) – implied volatility of 22.4%, or 4% less than its 15-day average

These companies with low implied volatility are integrated energy companies that have integrated and diversified business models by business and geography.

Usually, weaker stocks that fall sharply or that have negative news announced about them experience higher volatility. In the next part, we’ll look at integrated energy companies and refiners’ returns.


More From Market Realist