MPC, HFC, VLO, and PSX’s Forecast until December 31

Maitali Ramkumar - Author

Nov. 20 2018, Updated 2:40 p.m. ET

Implied volatility in refining stocks

So far, the implied volatilities in refining stocks have risen in the fourth quarter. The implied volatility in Marathon Petroleum (MPC) has increased by 11.7 percentage points since October 1 to the current level of 39.3%—the highest rise among its peers. The implied volatility in Phillips 66 (PSX) has risen by 9.1 percentage points to 29.5%.

The implied volatilities in Valero Energy (VLO) and HollyFrontier (HFC) have risen by 8.4 percentage points and 4.6 percentage points, respectively, since October 1 to the current levels of 33.7% and 38.7%, respectively. Marathon Petroleum stock is the highest considering the absolute implied volatility levels.

During the same period, refining stocks have fallen. The fall suggests that the implied volatilities and stock prices have moved inversely in the fourth quarter.

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Price range forecast

Considering refining stocks’ current implied volatilities and assuming a normal distribution of prices (bell curve model) and standard deviation of one (with a probability of 68.2%), refining stocks’ price could close between their estimated upper and lower price limits in the next 45 calendar days ending on December 31.

In the above chart, you can see that Marathon Petroleum stock might have the highest percentage upside or downside for the 45-day period ending on December 31. Marathon Petroleum could close between $74.5 and $56.4 per share. In contrast, Phillips 66 stock could have the lowest upside or downside. Phillips 66 could close between $106.6 and $86.6 per share. Valero Energy stock could close between $93.9 per share to $74.0 per share, while HollyFrontier stock could close between $72.5 per share and $55.2 per share.

Next, we’ll discuss these refiners’ dividend yields.


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