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What Can We Infer from Chesapeake’s Implied Volatility?

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Dec. 4 2020, Updated 10:53 a.m. ET

Implied volatility

Chesapeake Energy’s (CHK) implied volatility was ~51% on July 17, 2017. In comparison, its peers Noble Energy (NBL) and Cabot Oil & Gas had implied volatilities of 36.5% and ~32%, respectively.

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Stock price forecasts for the next week

Chesapeake Energy’s implied volatility of ~51% can be used to deduce its stock price range for the next week. If we assume a normal price distribution and a standard deviation of one, we can expect CHK’s stock to close between $4.53 and $5.20 in the next seven days. These statistical assumptions imply that CHK will stay in the above-mentioned range 68% of the time.

Implied volatility is a measure of the volatility of a stock’s price in the market. In a bearish environment, implied volatility usually rises. The opposite is true in a bullish market.

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