Implied volatility in MPC
In the previous part, we looked at analyst ratings for Marathon Petroleum (MPC). In this part, we’ll review the changes in MPC’s implied volatility. We’ll also estimate Marathon Petroleum’s stock price range for the eight-day period ending May 8, 2018.
Marathon Petroleum reported 1Q18 earnings and its intent to acquire Andeavor (ANDV) on April 30. Implied volatility in MPC rose by 2.7 percentage points over the previous day to 30.7%. However, this is higher than the 30-day average implied volatility, which stood at 27.9%. On the same day, Marathon Petroleum stock fell 8.0%.
Expected price range for Marathon Petroleum stock
Considering MPC’s implied volatility of 30.7% and assuming a normal distribution of prices (bell curve model) and a standard deviation of one (with a probability of 68.2%), Marathon Petroleum stock could close between $78.3 and $71.5 per share in the eight-day period ending on May 8.
Peers’ implied volatility
Like MPC, implied volatilities in Valero Energy (VLO) and Delek US Holdings (DK) increased by 1.1 percentage points and 1.2 percentage points, respectively, to 24.1% and 41.2% on April 30. Also, implied volatility in HollyFrontier (HFC) rose by one percentage point over the previous day to 34.0% on April 30. HFC stock rose 0.4% on the day. VLO and DK rose 1.0% and 1.7%, respectively, on April 30.
Implied volatility in the SPDR Dow Jones Industrial Average ETF (DIA) rose by 0.3 percentage points over the previous day to 14.1% on April 30. Also, the SPDR S&P 500 ETF (SPY) witnessed a rise in its implied volatility by 0.6 percentage points to 12.4% on the day. However, on April 30, DIA and SPY fell by 0.6% and 0.8%, respectively.
Move on to the next part to know where MPC’s dividend yield stands after 1Q18 earnings.