uploads/2017/08/MRO-2Q17-Post-Implied-Volatility-1.jpg

Analyzing Marathon Oil’s Implied Volatility

By

Updated

Marathon Oil’s implied volatility

As of August 4, 2017, Marathon Oil (MRO) had an implied volatility of ~47.4%, which is higher than its implied volatility of ~40.6% on June 19, 2017.

Article continues below advertisement

Weekly price range forecast

Based on its implied volatility of ~47.4% and assuming a bell curve model with a normal distribution of prices, 365 days in a year, and a standard deviation of one, Marathon Oil stock is expected to close between $13.75 and $12.05 in the next seven calendar days. MRO stock will stay in this range ~68.0% of the time, based on the standard statistical formula.

As of August 4, 2017, the SPDR S&P 500 ETF (SPY) has an implied volatility of 8.7%. Implied volatility doesn’t forecast a stock’s future direction. Implied volatility is derived from the option pricing model. That means the data are theoretical, and there is no guarantee these forecasts will be correct.

Marathon Oil’s moving averages

Currently, MRO is trading below its 200-day moving average but above its 50-day moving average. MRO regained its 50-day moving average two trading sessions ago, on August 3, 2017. On August 4, 2017, MRO stock closed at $12.90, whereas its 200-day and 50-day moving averages were $15.01 and $12.17, respectively. That also means that MRO’s 50-day moving average was below its 200-day moving average, which is technically a bearish sign. Currently, MRO stock is oversold, as it’s stretched below its 200-day moving average.

Peers

MRO’s peers California Resources (CRC), Devon Energy (DVN), and Southwestern Energy (SWN) have implied volatilities of ~91.6%, ~38.7%, and ~70.6%, respectively. All these companies have shown increases in their implied volatilities when compared to their implied volatilities of ~82.5%, ~36.7%, and ~57.8%, respectively, on June 19, 2017. The First Trust ISE-Revere Natural Gas ETF (FCG) invests in natural gas producers, whereas the Energy Select Sector SPDR ETF (XLE) generally invests at least 95.0% of its total assets in oil and gas companies.

Advertisement

More From Market Realist