Bloomberg News

Oil Volatility Rises as Futures Drop From Highest Level in Month

October 17, 2011

Oct. 17 (Bloomberg) -- Oil options volatility rose as the underlying futures declined from the highest level in a month after Germany said the European Union won’t provide a complete fix to the region’s debt crisis.

Implied volatility for at-the-money options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 42 percent at 12:30 p.m. in New York, up from 41.3 percent Oct. 14.

Oil for November delivery fell 54 cents, or 0.6 percent, to $86.26 a barrel at 12:33 p.m. on the New York Mercantile Exchange. Oil has dropped 5.6 percent this year.

The most active options contracts in electronic trading today were November $85 puts, with 2,724 lots changing hands as of 12:43 p.m. The options dropped 14 cents to 6 cents a barrel. November $86 puts, the next-most-active options with 2,195 lots, declined 22 cents to 20 cents a barrel. One contract covers 1,000 barrels of crude.

The volume of puts outnumbered calls by about 53 percent to 47 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 $85 puts were the most-active options traded in the previous session, with 6,040 lots changing hands. They dropped $1.41 to 20 cents a barrel. The next-most-active options, December $70 puts, fell 26 cents to 60 cents a barrel on volume of 5,697.

Open interest was highest for December $110 calls with 52,065 contracts. Next were December $100 calls with 51,248 and December $50 puts with 50,235.

--With assistance from Moming Zhou 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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