Forecasted price range for Chevron stock for the eight-day period ending March 30
Implied volatility in Chevron (CVX) has risen by 7.7% since January 2 to the current level of 21.4%. The stock fell 10.9%.
Volatility estimates stock return changes in a particular period. Implied volatility is the estimated future volatility of a security derived from an option pricing model. A high implied volatility would symbolize that the stock price is expected to move sharply, providing higher positive or negative returns. Conversely, with low implied volatility, lower positive or negative returns could be expected for a given period.
Considering CVX’s implied volatility of 21.4%, and assuming a normal distribution of prices (the bell curve model) and a standard deviation of one (with a probability of 68.2%), Chevron stock price could close between $117.3 and $110.1 per share up to March 30.
Implied volatility in peers
Implied volatility in Total (TOT) has risen 1.9% since January 2 to the current level of 17.0%. Also, implied volatilities in Statoil (STO) and Petrobras (PBR) have risen 5.4% and 9.6%, respectively, in the period. Currently, STO and PBR’s implied volatilities stand at 18.1% and 39.0%, respectively. TOT’s stock rose 1.3% since January 2. But STO and PBR’s stock prices rose sharply, by 5.5% and 32.6%, respectively, in the same period.
Like CVX, the SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF (SPY)—the broader market indicators—have seen rises in their implied volatilities of 11.2% and 9.3%, respectively, since January 2. DIA and SPY’s implied volatilities currently stand at 19.6% and 16.9%, respectively. During the period, since January 2, DIA and SPY saw falls in their values of 3.5% and 1.9%, respectively.
In the next part of this series, we’ll review analysts’ estimates for Chevron’s next dividend payment.