Bloomberg News

Crude-Oil Volatility Drops as Futures Gain for First Day in Four

October 05, 2011

Oct. 5 (Bloomberg) -- Oil options volatility fell as the underlying futures gained for the first day in four after the U.S. government reported an unexpected decline in inventories.

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 49.7 percent at 1:30 p.m. in New York, down from 55.7 percent yesterday.

Oil for November delivery jumped $3.69, or 4.9 percent, to $79.36 a barrel at 1:52 p.m. on the New York Mercantile Exchange. Oil has dropped 13 percent this year.

The most active options contract in electronic trading today was December $70 puts, with 1,582 lots changing hands. The options declined $1.26 to $2.14 a barrel. November $75 puts, the next-most-active contract, fell $1.57 to $1.35 on volume of 1,226. One contract covers 1,000 barrels of crude.

The volume of puts outnumbered calls by about 52 percent to 48 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 $70 puts were the most active options traded in the previous session, with 7,012 lots changing hands. They rose 30 cents to $1.25 a barrel. The next-most active options, December $90 calls, fell 24 cents to $1 a barrel on volume of 5,418.

Open interest was highest for December $50 puts with 49,943 contracts. Next were December $100 calls with 48,099 and December $120 calls with 42,611.

--With assistance from Mark Shenk in New York. Editors: Charlotte Porter, David Marino

To contact the reporter on this story: Justin Doom in New York at jdoom1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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