What Does Range Resources’ Implied Volatility Forecast for Its Stock Price?



Range Resources’ implied volatility

As of October 25, 2016, Range Resources (RRC) had an implied volatility of ~42.01%, which is ~33.9% below its 260-trading day historical price volatility of ~63.5%. In the five days leading up its 3Q16 earnings release, Range Resources’ implied volatility fell from ~47% to ~42%.

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30-day stock price forecast using implied volatility

Assuming normal distribution of prices (bell curve model) and standard deviation of one, based on its implied volatility of ~42%, Range Resources’ stock is expected to close between $40.2 and $31.6 after 30 calendar days. Based on the standard statistical formula, Range Resources’ stock will stay in this range ~68% of the time.

Other upstream stocks

As of October 25, 2016, stocks of upstream peers Encana (ECA), Consol Energy (CNX), and Diamondback Energy (FANG) have implied volatilities of ~54.4%, ~55.6%, and ~34.9%, respectively. The SPDR S&P 500 ETF (SPY) has an implied volatility of ~12.14%.

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


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