Integrated Energy or Refiners: Who Leads in Implied Volatility?



High implied volatility stocks

On March 16, 2017, Calumet Specialty Products Partners (CLMT) had the highest implied volatility among the integrated energy and refining companies that we’ll review in this series.

Calumet Specialty Products Partners’ implied volatility was 54.3% on March 16, 2017. It was ~8% lower than its 15-day average.

Below are the implied volatilities of other integrated energy and refining stocks on March 16:

  • Alon USA Energy (ALJ) – 49.4%, or ~5.4% above its 15-day average
  • Petrobras (PBR) – 48.5%, or ~6.1% above its 15-day average
  • CVR Refining (CVRR) – 45.9%, or ~0.9% below its 15-day average
  • CVR Energy (CVI) – 45.7%, 0.2% above its 15-day average
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The rise in Petrobras’ implied volatility, compared to its 15-day average, was the largest among the five integrated energy and refining stocks with the highest implied volatilities. On March 8, 2017, its implied volatility rose 3.5%, while its stock fell 7.5%. On the same day, Reuters reported that Petrobras’ CFO responded to Brazilian market regulators’ doubts about the company’s hedging practices. The CFO has full confidence in the company’s financial reporting.

Low implied volatility stocks

Now, let’s look at some integrated energy companies and refiners that had low implied volatilities on March 16, 2017.

  • ExxonMobil (XOM) – 12.9%, or 9% below its 15-day average
  • Chevron (CVX) – 16.0%, or 2.5% above its 15-day average
  • Phillips 66 (PSX) – 16.7%, or 5.9% below its 15-day average
  • BP (BP) – 17.1%, or 1.3% below its 15-day average
  • Suncor Energy (SU) – 19.4%, or 7.7% below its 15-day average

The companies with low implied volatilities are mostly integrated energy companies. They have integrated and diversified business models in terms of business and geography. As a result, they’re safer and more financially stable. Financial stability can translate into lower implied volatility in their stocks.

Usually, a stock that moves sharper or is expected to move sharper experiences high implied volatility.

In the next part, we’ll look at the returns for integrated energy companies and refiners.


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