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Nabors Industries’ Implied Volatility on August 18

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Nabors Industries’ implied volatility

On August 18, 2017, Nabors Industries’ (NBR) implied volatility was ~54%. Since NBR’s 2Q17 financial results were announced on August 2, its implied volatility has decreased from 60% to this level.

Nabors Industries comprises 0.01% of the iShares Dow Jones US ETF (IYY). IYY has increased 2% since August 2 versus an ~15% decline in NBR’s stock price during the same period. Since August 2, the S&P 500 Index (SPX-INDEX) has fallen 2%.

On August 14, 2017, Nabors Industries signed an agreement to acquire oilfield services industry peer Tesco Corporation (TESO). TESO’s implied volatility was 58% on August 14.

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Forecast for Nabors Industries

NBR stock could close between $6.08 and $7.06 in the next seven days. In this forecast, we consider Nabors Industries’ implied volatility and assume a normal distribution of stock prices, a standard deviation of 1, and a probability of 68.2%. NBR’s stock price was $6.57 on August 18, 2017.

Implied volatility for NBR’s peers

Helix Energy Solutions Group’s (HLX) implied volatility on August 18, 2017, was ~59%. Precision Drilling Corporation’s (PDS) implied volatility on August 20 was ~57%. Crude oil’s implied volatility was 26.3% on August 18.

What is NBR’s correlation with the price of crude oil? We’ll explore this topic in the next part of this series.

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