Southwestern Energy’s implied volatility
As of March 23, 2018, Southwestern Energy (SWN) had implied volatility of ~66.1%, higher than its volatility of ~58.2% at the end of 4Q17. In the previous five trading sessions, SWN’s implied volatility had risen from ~57.6% to ~66.1% due to a ~1% decline in its stock price.
SWN’s price range forecast
Based on Southwestern Energy’s implied volatility of ~66.1% and assuming a normal distribution of prices, 365 days in a year, and standard deviation of one, SWN stock is expected to close between $4.81 and $4.01 in the next seven calendar days. The stock will likely stay in this range 68% of the time. On March 23, SWN stock price closed at $4.41.
Peers’ price forecasts
As of March 23, 2018, Range Resources (RRC) had implied volatility of ~47.7%, meaning RRC stock is expected to close between $15.55 and $13.63 in the next seven calendar days. On March 23, RRC stock closed at $14.59. Like SWN, RRC produces primarily natural gas.
As of March 23, 2018, the First Trust Natural Gas ETF (FCG) had implied volatility of ~31.2%, meaning FCG is expected to close between $21.47 and $19.69 in the next seven calendar days. On March 23, FCG closed at $20.58. FCG represents an index of energy stocks that derive a substantial portion of their revenue from natural gas exploration and production. Based on the above calculation inputs, there is a 68% probability that these stocks will close in these ranges during the given period.