Series so far
BP (BP) stock has risen due to better oil prices and stronger markets in the first quarter, affecting its 50-day moving average, which has moved closer to its 200-day moving average in the period. We discussed BP’s moving averages in the previous article.
Now, let’s consider BP’s implied volatility to forecast its stock price range leading up to March 29, 2019.
Expected price range for BP stock
Implied volatility in BP has fallen by 11 percentage points since January 2, 2019, to its current level of 16%. In the same period, BP stock has risen 10%, suggesting that its implied volatility and its stock price have moved inversely in the quarter.
Considering BP’s implied volatility of 16% and assuming a normal distribution of prices (using the bell curve model) and a standard deviation of one (with a probability of 68.2%), BP stock could close between $43.9 and $41.0 in the 17 days that end on March 29, 2019.
Peers’ implied volatilities
Similarly, implied volatility in Total (TOT) has fallen by nine percentage points since January 2 to 17%. The implied volatilities in Petrobras (PBR) and Suncor Energy (SU) have decreased by 14 percentage points and 12 percentage points, respectively, in the same period. PBR’s and SU’s implied volatilities currently stand at 33% and 21%, respectively.
If we consider these energy companies’ stock prices, we’ll see that they’ve risen so far in the quarter. Total, Petrobras, and Suncor stock have risen 8%, 13%, and 17%, respectively, since January 2, 2019. Again, this shows that these energy stocks and their implied volatilities have moved in opposite directions in the current quarter.
In the next article, we’ll consider BP’s dividend yield trend.