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Cobalt International’s Stock Price Forecast Using Implied Volatility

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Cobalt International Energy’s implied volatility

As of May 10, 2017, Cobalt International Energy (CIE) had an implied volatility of ~235.6%, which is ~119.9% above its 260-trading day historical price volatility of ~107.2%.

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Stock price range forecast

Assuming a normal distribution of prices (bell curve model) and a standard deviation of one, based on its implied volatility of ~235.6%, Cobalt International Energy’s stock is expected to close between $0.44 and $0.08 after 30 calendar days. Based on the standard statistical formula, Cobalt International Energy’s stock will stay in this range ~68% of the time.

Other upstream stocks

As of February 27, 2017, upstream peers California Resources (CRC), ConocoPhillips (COP), and Murphy Oil (MUR) have implied volatilities of ~78.62%, ~23.95%, and ~34.50%. By comparison, the SPDR S&P 500 ETF (SPY) has an implied volatility of ~12.64%.

Notably, the according to the SPDR S&P 500 ETF Trust prospectus, SPY “seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 Index.”

Remember, implied volatility only shows the market’s opinion of a stock’s potential moves—it can’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 its estimates will be correct.

For ongoing updates on Cobalt International and this industry, keep checking in with Market Realist’s Upstream Oil and Gas page.

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