Bloomberg News

Oil Volatility Increases Following Loss of Investor Confidence

October 04, 2011

Oct. 4 (Bloomberg) -- Oil options volatility increased as the underlying futures declined for a third day amid concern that fuel demand will drop along with investor confidence in the U.S. and European economies.

Implied volatility for at-the-money options expiring in November, a measure of expected price swings in futures and a gauge of options prices, was 56.1 percent at 2 p.m. in New York, up from 53.1 percent yesterday.

Oil for November delivery fell $1.94, or 2.5 percent, to settle at $75.67 a barrel on the New York Mercantile Exchange. Oil has dropped 17 percent this year.

The most active options contract in electronic trading today was November $70 puts, with 3,860 lots changing hands. The options gained 34 cents to $1.29 a barrel. December $50 puts, the next-most-active contract, rose 8 cents to 31 cents on volume of 2,047. One contract covers 1,000 barrels of crude.

The volume of puts outnumbered calls by about 60 percent to 40 percent.

The exchange distributes real-time data for electronic trading and releases information on floor trading, where the bulk of options trading occurs, the next business day.

November $95 calls were the most active options traded in the previous session, with 6,506 lots changing hands. They declined 2 cents to 5 cents a barrel. The next-most active options, November $70 puts, gained 19 cents to 95 cents a barrel on volume of 7,571.

Open interest was highest for December $50 puts with 50,173 contracts. Next were December $100 calls with 49,081 and December $70 puts with 42,774.

--With assistance from Margot Habiby in Dallas. Editors: Charlotte Porter, Bill Banker

To contact the reporter on this story: Justin Doom in New York at

To contact the editor responsible for this story: Dan Stets at

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