Baker Hughes’s Implied Volatility: What It Implies

Alex Chamberlin - Author

Dec. 19 2016, Updated 9:35 a.m. ET

Baker Hughes’s implied volatility

On December 9, 2016, Baker Hughes (BHI) had implied volatility of ~30%. Since BHI’s 3Q16 financial results were announced on October 25, 2016, its implied volatility increased from ~29% to the current level.

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What does implied volatility mean?

Implied volatility (or IV) reflects investors’ views of a stock’s potential movement. However, IV does not forecast direction. Implied volatility is derived from an option pricing model. Investors should note that the correctness of an implied volatility’s suggested price can be uncertain.

BHI’s implied volatility on the first week of November spiked, following its proposed deal with General Electric (GE) on October 31. You can read more about this in Market Realist’s GE to Partner with BHI? The Changing Oilfield Services Landscape.

In comparison, CARBO Ceramics’s (CRR) implied volatility on December 9 was 74%. Halliburton’s (HAL) implied volatility on December 9 was 31.7%, while Weatherford International’s (WFT) implied volatility on December 9 was 62%.

Energy stocks are typically correlated with crude oil prices. Has BHI’s correlation with crude oil prices increased? Let’s find out in the next part of this series.


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