Implied volatility in Shell
In this article, we’ll look at Royal Dutch Shell’s (RDS.A) stock price forecast range for the 21 days leading up to its earnings release. This price range forecast will be based on the current level of implied volatility in Shell.
Shell is expected to post its fourth-quarter earnings results on January 31.
Implied volatility in Shell has fallen 6.4 percentage points over December 10 to the current level of 19.9%. During the same period, Shell stock has risen 4.1%.
Forecast price range for Shell stock
To forecast Shell’s stock price range, we’ve considered its implied volatility of 19.9% and assumed a normal distribution of prices (using the bell curve model) and a standard deviation of one (with a probability of 68.2%). Thus, with the stated consideration and assumption, Shell stock could close between $64.2 and $58.3 in next 21 days ending on January 31, its fourth-quarter earnings release day.
Peers’ implied volatilities
BP’s (BP) implied volatility has fallen 6.1 percentage points since December 10 to 21.9%. Total’s (TOT) and Petrobras’s (PBR) implied volatilities have fallen 8.1 percentage points and 8.6 percentage points, respectively, in the same period. Their implied volatilities currently stand at 19.8% and 41.1%, respectively.
If we consider these integrated energy companies’ stock prices, then BP, Total, and Petrobras have risen 3.4%, 1.6%, and 14.4%, respectively, since December 10.
In the next article, we’ll evaluate analysts’ ratings for Shell ahead of its earnings release.