uploads///DNR Q Post Implied Volatility

What Does Denbury’s Implied Volatility Mean for Its Price?


Dec. 4 2020, Updated 10:53 a.m. ET

Denbury Resources’ implied volatility

On November 7, 2016, Denbury Resources (DNR) had an implied volatility of ~82.2%, ~39.2% lower than its 260-day historical price volatility of ~135.2%. 

After it announced its earnings on November 3, 2016, Denbury’s implied volatility fell from ~92.7% to ~82.2% in three sessions.

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Denbury Resources’ 30-day stock price forecast using implied volatility

Assuming the normal distribution of prices and a standard deviation of one, based on its implied volatility of ~82.2%, Denbury Resources’ stock is expected to close between $3.25 and $2.01 after 30 days. Based on the standard statistical formula, Denbury Resources’ stock will stay in this range ~68% of the time.

Other upstream stocks

On November 7, 2016, other upstream stocks Parsley Energy (PE), Gulfport Energy (GPOR), and CONSOL Energy (CNX) had implied volatilities of ~36.0%, ~44.7%, and ~59.9%, respectively. The SPDR S&P 500 ETF (SPY) had an implied volatility of ~14.7%.

Implied volatility shows the market’s opinion of a stock’s potential movements, but it doesn’t forecast the direction of said movements. Implied volatility is derived from an option pricing model, meaning that the data are theoretical in nature, and there’s no guarantee that the forecasts will be correct.


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