What Does Marathon Oil’s Implied Volatility Forecast for Its Stock?



Marathon Oil’s implied volatility

On December 15, 2016, Marathon Oil (MRO) had implied volatility of ~47.1%, which is ~31.3% below its 260-trading day historical price volatility of ~68.5%.

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Stock price forecast using implied volatility

Assuming normal distribution of prices on the bell curve and a standard deviation of 1, based on its implied volatility of ~47.1%, Marathon Oil stock is expected to close between $15.74–$20.66 after 30 calendar days. Based on the standard statistical formula, Marathon Oil stock could stay in this range ~68% of the time.

Other upstream stocks

On December 15, 2016, other upstream stocks like Denbury Resources (DNR), Diamondback Energy (FANG), and ConocoPhillips (COP) have implied volatilities of ~81.2%, ~36.0%, and ~29.5%, respectively. The SPDR S&P 500 ETF (SPY) has implied volatility of ~12.5%.

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 that these forecasts will be correct.


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