Implied volatility in BP
In the earlier parts of this series, we looked at analyst ratings for BP (BP). In this part, we’ll look at changes in BP’s implied volatility. We’ll also estimate BP stock’s price range for the ten-day period ending February 16, 2018.
BP reported earnings on February 6, 2018. On the day, implied volatility in BP (BP) fell 7.4% to 23.3%. However, this was higher than the 30-day average implied volatility, which stood at 18.2%. On the same day, BP stock rose 2.0%.
Expected price range for BP stock for ten-day period ending February 16
Considering BP’s implied volatility of 23.3% and assuming a normal distribution of prices (bell curve model) and a standard deviation of one (with a probability of 68.2%), BP stock price could close between $42.1 and $39.0 per share in the ten-day period ending February 16.
Peers’ implied volatility
Like BP, implied volatility in Total (TOT) and Petrobras (PBR) fell 0.6% and 1.1%, respectively, over the previous day to 21.0% and 43.4% on February 6, 2018. Also, implied volatility in Royal Dutch Shell (RDS.A) fell 0.1% to 22.6% in the same period. In terms of stock price change, TOT and PBR stock rose 2.8% and 5.0%, respectively, on February 6. Plus, Shell stock rose 1.8% on the same day.
The SPDR Dow Jones Industrial Average ETF (DIA) saw a fall in its implied volatility by 4.7% to 20.4% on February 6. Also, the SPDR S&P 500 ETF (SPY) witnessed a decline in its implied volatility by 7.2% to 20.6% on the day. However, on February 6, DIA rose 2.3%, and SPY surged 2.0% on the day.