Volatility shows how much a stock return changes in a given period. When calculated based on historical stock prices, it is called historical volatility.
A stock’s expected future volatility can be calculated using an option pricing model, which is called implied volatility. Larger implied volatility would mean that the stock price is expected to move sharply, providing higher positive or negative returns. However, lower implied volatility would suggest lower positive or negative returns for a given period.
Expected price range for MPC stock
Implied volatility in Marathon Petroleum (MPC) has fallen from 23.2% on October 2, 2017, to its current level of 19.2%. In the same period, MPC stock price has risen 15.7%.
MPC’s implied volatility is 19.2%. Assuming a normal distribution of prices, a standard deviation of 1.0, and a probability of 68.2%, MPC stock could close between $62.10 and $67.20 in the 15 calendar days ending December 29, 2017.
Implied volatility in MPC’s peers
Implied volatility readings in Andeavor (ANDV), Valero Energy (VLO), and Phillips 66 (PSX) have dropped 3.1%, 4.7%, and 1.0%, respectively, since October 2. Currently, ANDV, VLO, and PSX have implied volatilities standing at 18.4%, 17.7%, and 15.1%, respectively. In this period, PSX and ANDV stock rose 7.8% and 5.0%, respectively, but VLO rose 13.5%.
DIA and SPY reported implied volatilities of 8.7% and 7.5%, respectively. Since October 2, DIA and SPY rose 9.0% and 5.3%, respectively.
In the next part, we’ll evaluate the analyst ratings for Marathon Petroleum.