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Analyzing Tidewater’s Implied Volatility

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Jan. 19 2017, Published 11:25 a.m. ET

Tidewater’ implied volatility

Tidewater (TDW) is a highly volatile stock. On January 18, 2017, Tidewater had an implied volatility of 163%. Since Tidewater’s fiscal 2Q17 financial results were announced on November 7, 2016, its implied volatility has decreased from 258% to the current level. Tidewater accounts for 0.04% of the iShares S&P Small-Cap 600 Value ETF (IJS).

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Implied volatility for Tidewater’s peers

Helmerich & Payne’s (HP) implied volatility on January 18 was ~33%, while Precision Drilling’s (PDS) implied volatility was ~48%. Flotek Industries’ (FTK) implied volatility on January 18 was ~72%. Read more on Flotek Industries in Market Realist’s What to Expect from Flotek Industries’ 4Q16 Earnings.

What does “implied volatility” mean?

Implied volatility shows investors’ views of a stock’s potential movement. However, it doesn’t forecast direction. Implied volatility is derived from an option pricing model. Investors should note that implied volatility suggested prices aren’t alway correct.

Why Tidewater’s volatility rose

Tidewater’s volatility rose following concerns due to a possible debt covenant violation. Projected levels of offshore drilling activity indicated an additional slowdown. In October and November 2016, Tidewater received an extension to amend its various debt arrangements with lenders. Tidewater’s debt covenant issue can be revisited on January 27.

Next, we’ll discuss investors’ short interest in Tidewater.

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