uploads///OXY Q Post Implied Volatility

What Does OXY’s Implied Volatility Forecast for Its Stock Price?


Nov. 8 2016, Updated 4:04 p.m. ET

Occidental Petroleum’s implied volatility

On November 2, 2016, Occidental Petroleum (OXY) had an implied volatility of ~26.8%, which is ~3.6% below its 260-trading day historical price volatility of ~27.8%. After its earnings were announced on November 1, 2016, Occidental Petroleum’s implied volatility increased from ~23.5% to ~26.8% in the two sessions.

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Occidental Petroleum’s 30-day stock price forecast using implied volatility

Assuming normal distribution of prices (using the bell curve model) and standard deviation of 1, based on its implied volatility of ~26.82%, Occidental Petroleum’s stock is expected to close between $62.58–$73.00 after 30 calendar days. Based on the standard statistical formula, Occidental Petroleum’s stock should stay in this range ~68% of the time.

Other upstream stocks

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

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


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