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What Schlumberger’s Implied Volatility Suggests

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Schlumberger’s implied volatility

On March 3, 2017, Schlumberger’s (SLB) implied volatility was 16.5%. Since its 4Q16 financial results were announced on January 20, 2017, Schlumberger’s implied volatility has fallen marginally. SLB makes up 3.6% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). Read about Schlumberger’s 4Q16 in Why Did Schlumberger’s 4Q16 Earnings Beat Estimates?

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Implied volatility for SLB’s peers

Helmerich & Payne’s (HP) implied volatility on March 3 was ~29%, while Helix Energy Solutions’ (HLX) implied volatility was ~55%. TechnipFMC’s (FTI) implied volatility on March 3 was ~27%.

What does implied volatility mean?

Implied volatility represents investors’ views on a stock’s potential movements. However, implied volatility doesn’t forecast the direction of these movements. 

Implied volatility is derived from an option pricing model. Investors should note that the correctness of the prices suggested by implied volatility can be uncertain.

What does implied volatility suggest for SLB’s price?

Based on Schlumberger’s implied volatility and assuming a normal distribution of stock prices and a standard deviation of one, there’s a 68.2% probability that SLB’s stock will close between $82.54 and $79.86 in the next seven days. SLB’s stock price was $80.70 on March 3, 2017.

Next, we’ll discuss what Schlumberger’s short interest suggests.

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