uploads///MRO Q Post Implied Volatility

What Marathon Oil’s Implied Volatility Forecasts for Its Stock


Nov. 7 2016, Updated 1:05 p.m. ET

Marathon Oil’s implied volatility

As of November 2, 2016, Marathon Oil (MRO) had an implied volatility of ~54.6%, which is ~19.3% below its 260-day trading historical price volatility of ~67.5%. In the five days leading up to its earnings, Marathon Oil’s implied volatility rose from ~48.0% to ~54.6%.

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Marathon Oil’s 30-day stock price forecast using implied volatility

Assuming normal distribution of prices (the bell curve model) and a standard deviation of 1.0, based on Marathon Oil’s implied volatility of ~54.6%, the stock is expected to close between $14.78 and $10.78 after 30 calendar days. Based on the standard statistical formula, Marathon Oil stock will stay in this range ~68.0% of the time.

Other upstream stocks

As of November 2, 2016, other upstream stocks such as Consol Energy (CNX), California Resources (CRC), and Denbury Resources (DNR) have implied volatilities of ~58.7%, ~103.6%, and ~92.7%. The SPDR S&P 500 ETF (SPY) has an implied volatility of ~16.1%.

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


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