Bloomberg News

Oil Volatility Decreases as Futures Rise on China, Japan Growth

October 24, 2011

Oct. 24 (Bloomberg) -- Oil options volatility fell as the underlying futures rose to a two-month high on reports of economic growth in China and Japan, the world’s second- and third-largest oil consumers.

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 41.3 percent at noon in New York, down from 42.1 percent Oct. 21.

Oil for December delivery advanced $3.04, or 3.5 percent, to $90.44 a barrel at 12:12 p.m. on the New York Mercantile Exchange, exceeding $90 for the first time since August.

The most active options contracts in electronic trading today were December $80 puts, with 1,926 lots changing hands as of 12:29 p.m. The options declined 75 cents to 85 cents a barrel. December $65 puts, the next-most-active options with 1,881 lots, fell 8 cents to 10 cents a barrel. One contract covers 1,000 barrels of crude.

Calls outnumbered puts 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.

December $95 calls were the most-active options traded in the previous session, with 8,811 lots changing hands. They rose 22 cents to 99 cents a barrel. The next-most-active options, December $90 calls, gained 51 cents to $2.63 a barrel on volume of 5,887.

Open interest was highest for December $110 calls with 53,239 contracts. Next were December $100 calls with 52,987 and December $50 puts with 49,988.

--With assistance from Moming Zhou in New York. Editors: Charlotte Porter, Margot Habiby

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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