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Why Is Tidewater’s Implied Volatility Up?

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Aug. 18 2020, Updated 5:33 a.m. ET

OFS stocks with high implied volatilities

On January 17, 2017, Tidewater (TDW) had the highest implied volatility among the OFS (oilfield equipment and services) companies that are part of the VanEck Vectors Oil Services ETF (OIH). Tidewater’s implied volatility was 206.4%, while its 15-day average implied volatility was 144.9%. Its volatility was ~42.5% above its 15-day average.

Previously, Tidewater’s negotiations with lenders and bondholders were extended until November 11, 2016. Negotiations were subsequently extended to January 27, 2017.

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The rise in Tidewater’s current implied volatility compared to its 15-day average is the highest among the five OFS stocks with the highest implied volatilities. TDW’s implied volatility rose 34.6% on January 17, 2017. On the same day, the stock fell 11.3%. Uncertainty surrounding Tidewater’s debt has kept the stock’s implied volatility elevated.

Below are the volatilities of other OFS stocks as of January 17:

  • Seadrill (SDRL): 91.1%, or 9.1% above its 15-day average
  • Weatherford International (WFT): 77.2%, or 7.9% above its 15-day average
  • CARBO Ceramics (CRR): 73.3%, or 1.6% below its 15-day average
  • Noble (NE): 64.2%, or 1.2% below its 15-day average

OFS stocks with low implied volatilities

Now, let’s look at oilfield services stocks with low implied volatilities on January 17:

  • Schlumberger’s (SLB) implied volatility was 19.9%, 3.9% lower than its 15-day average.
  • Halliburton’s (HAL) implied volatility was 26.8%, 7.5% lower than its 15-day average.
  • Baker Hughes’s (BHI) implied volatility was 28.9%, 7.3% lower than its 15-day average.
  • Tenaris’s (TS) implied volatility was 29%, 8.3% lower than its 15-day average.
  • Helmerich & Payne’s (HP) implied volatility was 32.5%, 1% lower than its 15-day average.

Companies with stronger financial situations generally show lower implied volatility. But large movements in stocks can also cause their implied volatilities to rise. In the next part, we’ll look at these stocks’ returns.

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