Marathon Oil’s Stock Price Forecast Using Implied Volatility



Marathon Oil’s implied volatility

On February 17, 2017, Marathon Oil (MRO) had an implied volatility of ~35.2%, which was ~39.0% below its 260-trading-day historical price volatility of ~57.7%.

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Stock price range forecast

Assuming the normal distribution of prices using the bell curve model and a standard deviation of one, based on its implied volatility of ~35.2%, Marathon Oil stock is expected to close between $17.87 and $14.59 after 30 calendar days. Based on the standard statistical formula, Marathon Oil’s stock will stay in this range ~68% of the time.

Other upstream stocks

On February 17, 2017, upstream stocks California Resources (CRC), ConocoPhillips (COP), and Murphy Oil (MUR) had implied volatilities of ~74.5%, ~26.3%, and ~35.9%, respectively. The SPDR S&P 500 ETF (SPY) (SPX-INDEX) had an implied volatility of ~10.5%.

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


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