What’s BP Stock’s Forecast Range following Its Q2 2018 Earnings?



Series so far

We began the series by examining BP’s (BP) second-quarter earnings by segment. BP’s earnings rose and surpassed estimates in the quarter. We then discussed BP stock, which rose on its earnings release day. We also reviewed analysts’ ratings on BP, which could strengthen going forward due to BP’s improving financial position.

In this article, 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 on August 10.

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Implied volatility in BP

BP reported its earnings results on July 31. On the day, its implied volatility fell 4.3 percentage points to 16.5%, lower than its 30-day average implied volatility of 21.3%. On the same day, BP stock rose 1.5%.

Expected price range for BP stock

Considering BP’s implied volatility of 16.5% and assuming a normal distribution of prices (using the bell curve model) and standard deviation of one (with a probability of 68.2%), BP stock could close between $46.3 and $43.9 per share in the ten-day period ending on August 10.

Peers’ implied volatilities

Like BP, implied volatility in Petrobras (PBR) and PetroChina (PTR) fell 0.1 percentage points and 0.3 percentage points, respectively, over the previous day to 46.6% and 28.7%, respectively, on July 31. Implied volatility in YPF (YPF) fell 0.8 percentage points to 38.9% on the same day.

If we consider their stock price changes, PBR and PTR fell 1.1% and 0.4%, respectively, on July 31, while YPF rose 0.9% on the same day.


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