Bloomberg News

Oil Options Volatility Rises as Futures Fall on Climbing Dollar

October 31, 2011

Oct. 31 (Bloomberg) -- Oil options volatility rose as the underlying futures declined on a climbing U.S. dollar, which gained against all 16 major peers.

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 39.3 percent at 12:30 p.m. in New York, up from 36.7 percent on Oct. 28, the first increase in three trading sessions.

“We’re getting a little volatility rise here because it’s gotten hammered so much,” Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York, said by telephone. “We’re looking at a double bottom on volatility, and this would be a natural bounce.”

The most-active options contracts in electronic trading today were March $160 calls with 910 lots changing hands as of 12:42 p.m. The options gained 1 cent to 12 cents a barrel. December $110 calls, with 897 lots, were the next most active and fell 6 cents to 9 cents a barrel. One contract covers 1,000 barrels of crude.

Puts accounted for about 51 percent of the volume.

Oil for December delivery fell $1.36, or 1.5 percent, to $91.96 at 12:43 p.m. on the New York Mercantile Exchange.

December $90 puts were the most-active options traded in the previous session, with 6,080 lots changing hands. They fell 12 cents to $1.80 a barrel. The next-most-active options, December $85 puts, declined 13 cents to 77 cents a barrel on volume of 4,990. Puts accounted for about 51 percent of the 109,673 lots.

Open interest was highest for December $110 calls with 53,162 contracts. Next were December $50 puts with 49,917 and December $120 calls with 44,861.

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.

--With assistance from Mark Shenk 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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