National Oilwell Varco’s implied volatility
On December 12, 2017, National Oilwell Varco’s (NOV) implied volatility was 24.7%. Since its 3Q17 financial results were declared on October 26, NOV’s implied volatility (or IV) has fallen from ~30% to the current level. Implied volatility (or IV) signals a stock’s potential price movement as viewed by option traders.
Crude oil’s implied volatility
Since October 26, 2017, crude oil’s implied volatility has fallen from 24% to ~19% now. In May 2017, crude oil’s implied volatility was ~33%, which is the highest its been in 2017 so far.
National Oilwell Varco’s seven-day stock price forecast
Considering National Oilwell Varco’s implied volatility, NOV’s stock will likely close between $34.27 and $32.01 in the next seven days. Here, we assume normal distribution of stock prices and one standard deviation probability of 68.2%. NOV’s stock price was $33.14 on December 12, 2017.
Implied volatility for NOV’s peers on December 12
McDermott International’s (MDR) implied volatility on December 12, 2017, was 39%, so MDR’s stock price could vary between $7.79 and $6.99 in the next seven days. Helix Energy Solutions’ (HLX) implied volatility was ~48% on December 12. Thus, HLX’s stock price could vary between $7.12 and $6.24 in the next seven days. TechnipFMC’s (FTI) implied volatility on December 12 was ~30%, which implies FTI’s stock price could vary between $29.80 and $27.42 in the next seven days.
The energy sector makes up 5.7% of the S&P 500 Index (SPX-INDEX). The SPX-INDEX rose 17% in the past one year. Read Market Realist’s The 5 Worst Oilfield Companies by Year-to-Date Returns for more information.
Typically, energy stocks are correlated with crude oil price. Has NOV’s correlation with crude oil prices risen? Let’s find this out in the next part.