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Cedar Fair To $57 By September?

|Includes: Cedar Fair, L.P. (FUN)

Here is something for your consideration outside of fundamentals.

I ran a MonteCarlo simulation using VentureSim in Excel to try and model the coming returns on FUN. The way VentureSim's V_NORMAL function works is that you input a mean and a standard deviation and it will randomize an integer within a normal distribution according to your parameters.

The first thing I did was collect 5 years of historical weekly prices and ran some descriptive statistics:

I then converted the weekly mean and standard deviation into monthly ones which resulted in a monthly arithmetic mean of 3.2%. At this point you would then input your mean and standard deviation into the V_NORMAL function and let it work. However I decided not to use the historical standard deviation but rather the implied volatility from FUN's coming call options.

For example, FUN's June14 $55 Call has an implied volatility of 21.78%. I divided that number by twelve to come up with a monthly implied volatility of about 1.8%.

The return in period 1 (June) uses the June14 call, period 2 (July) uses the July14, period 3 (August) uses July14, and finally period 4 (September) uses the September14 call's implied volatility. All of these were from the $55 strike price.

Running the simulation 10,000 times, I came up with the following:

Obviously the past does not imply the future and nothing beats fundamental analysis, but these types of things are great for different thinking points.

If you have any suggestions on other ways to create a simple stock return simulation model or have found an error in my method, please leave a comment!

Disclosure: I am long FUN.