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Analyzing Nabors Industries’ Implied Volatility

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Nabors Industries’ implied volatility

On February 2, 2017, Nabors Industries (NBR) had an implied volatility of 44%. Since Nabors’ 3Q16 financial results were announced on October 25, 2016, its implied volatility fell from 50.5% to the current level. Nabors accounts for 3.5% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

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Implied volatility for Nabors’ peers

Halliburton’s (HAL) implied volatility on February 2 was ~25%, while McDermott International’s (MDR) implied volatility was ~47% on that day. Baker Hughes’s (BHI) implied volatility on February 2 was ~24%.

What does “implied volatility” mean?

Implied volatility reflects investors’ views of a stock’s potential movement. However, implied volatility doesn’t forecast direction. Implied volatility is derived from an option pricing model. Investors should note that the correctness of implied volatility—suggested prices can be uncertain.

What does implied volatility suggest for Nabors’ price?

Based on Nabors Industries’ implied volatility and assuming the normal distribution of stock prices and one standard deviation probability of 68.2%, Nabors stock will likely close between $16.86 and $14.92 in the next seven days. Nabors’ stock price was $15.89 on February 2.

In the next part, we’ll discuss Weatherford International’s implied volatility.

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