Expected price range
In the previous part, we discussed the trend in Marathon Petroleum’s (MPC) moving averages. Now, we’ll discuss the company’s implied volatility to forecast its stock price range until the end of the first quarter.
The implied volatility in Marathon Petroleum has declined by 16 percentage points since January 2 to the current level of 24%. During the same period, Marathon Petroleum stock has risen 4%. The implied volatility in Marathon Petroleum and its stock price moved inversely in the first quarter.
Considering Marathon Petroleum’s implied volatility of 24% and assuming a normal distribution of prices (bell curve model) and a standard deviation of one with a probability of 68.2%, the stock price could close between $64.6 per share and $59.5 per share in the next 11 days ending on March 29. Currently, the stock trades at $62.1 per share.
Peers’ implied volatilities
The implied volatilities in Phillips 66 (PSX), Valero Energy (VLO), and Delek US Holdings (DK) have fallen by 13 percentage points, 18 percentage points, and 12 percentage points, respectively, since January 2. Phillips 66, Valero Energy, and Delek US Holdings’ stock prices have risen 12%, 15%, and 9%, respectively, during the stated period. The implied volatilities and stock prices have moved in opposite directions. Currently, the implied volatilities in Phillips 66, Valero Energy, and Delek US Holdings are 19%, 23%, and 34%, respectively.
The trend is also visible between the implied volatilities and the values of the SPDR Dow Jones Industrial Average ETF (DIA) and the SPDR S&P 500 ETF’s (SPY), which resemble the Dow Jones Industrial Average and the S&P 500 Index, respectively.
Since January 2, the implied volatilities in DIA and SPY have fallen by 11 percentage points and 12 percentage points, respectively, to 12% and 11%, respectively. In the first quarter, DIA and SPY’s values have risen 11% and 13%, respectively.