Bloomberg News

Oil Volatility Drops as Futures Rise for Second Straight Day

October 06, 2011

Oct. 6 (Bloomberg) -- Oil options volatility declined as the underlying futures gained for the second consecutive day after European Central Bank President Jean-Claude Trichet announced a bond-purchase program to stimulate economic growth.

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 45.6 percent at 12:36 p.m. in New York, down from 49.8 percent yesterday.

Oil for November delivery gained $1.60, or 2 percent, to $81.28 a barrel at 1 p.m. on the New York Mercantile Exchange. Oil has dropped 11 percent this year.

The most active options contract in electronic trading today was December $60 puts, with 2,562 lots changing hands. The options declined 18 cents to 42 cents a barrel. November $75 puts, the next-most-active contract, fell 60 cents to 66 cents on volume of 2,240. One contract covers 1,000 barrels of crude.

The volume of puts outnumbered calls by about 57 percent to 43 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.

March $75 puts were the most active options traded in the previous session, with 7,050 lots changing hands. They fell $1.76 to $7.06 a barrel. The next-most active options, March $60 puts, declined 94 cents to $2.56 a barrel on volume of 5,920.

Open interest was highest for December $100 calls with 50,533 contracts. Next were December $50 puts with 49,119 and December $120 calls with 42,572.

--With assistance from Mark Shenk in New York. Editor: Bill Banker, Charlotte Porter

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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