Your Denbury Stock Forecast: What Implied Volatility Tells Us



Denbury’s implied volatility

As of February 27, 2017, Denbury Resources (DNR) had an implied volatility of ~67.62%, which is ~40.6% below its 260-trading-day historical price volatility of ~113.9%.

Article continues below advertisement

Stock price range forecast

Assuming normal distribution of prices (bell curve model) and a standard deviation of one, based on its implied volatility of ~67.62%, Denbury stock is expected to close between $3.22 and $2.18 after 30 calendar days. Based on the standard statistical formula, Denbury’s stock would likely stay in this range ~68% of the time.

Other upstream stocks

As of February 27, 2017, the stocks of upstream peers California Resources (CRC), ConocoPhillips (COP), and Murphy Oil (MUR) have implied volatilities of ~73.7%, ~26.7%, and ~37.5%, while the SPDR S&P 500 ETF (SPY) has an implied volatility of ~11.7%.

Remember, implied volatility shows the market’s opinion of the stock’s potential moves. But it doesn’t forecast direction. Implied volatility is derived from option pricing model, which means that the data is theoretical in nature—and that there can be no guarantee these that forecasts will be correct.


More From Market Realist