What CRC’s Higher Implied Volatility Means for Its Stock

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California Resources&#x2019; implied volatility

On December 21, 2016, California Resources (CRC) had an implied volatility of ~93.1%, which was ~45.9% lower than its 260-day historical price volatility of ~172.0%.

Stock price forecast using implied volatility

Assuming the normal distribution of prices with the bell curve model and a standard deviation of one, based on its implied volatility of ~93.1%, California Resources’ stock is expected to close between \$23.66 and \$13.68 after 30 days. Based on the standard statistical formula, California Resources’ stock should stay in this range ~68% of the time.

Other upstream stocks

On December 21, 2016, other upstream stocks Occidental Petroleum (OXY), Diamondback Energy (FANG), and ConocoPhillips (COP) had implied volatilities of ~21.8%, ~35.4%, and ~27.9%, respectively. The SPDR S&P 500 ETF (SPY) had an implied volatility of ~11.9%.

Implied volatility shows the market’s opinion of a stock’s potential movement, but it doesn’t forecast the direction of this movement. 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.