Bloomberg News

Oil Volatility Declines as Futures Fall on U.S. Supply Increase

December 29, 2011

Dec. 29 (Bloomberg) -- Oil options volatility fell as the underlying futures dropped after an Energy Department report showed that U.S. inventories increased last week.

Implied volatility for at-the-money options expiring in February, a measure of expected swings in futures and a gauge of options prices, slipped to 32.5 percent at 1 p.m. in New York from 33 percent yesterday. Oil dropped as much as 1.1 percent after the department said supplies rose 3.9 million barrels to 327.5 million last week.

The most active options contracts in electronic trading today were March $120 calls, with 888 lots changing hands as of 1:08 p.m. in New York. The options rose 2 cents to 62 cents a barrel. February $90 puts traded 760 lots, dropping 7 cents to 56 cents. One contract covers 1,000 barrels of crude.

Oil for February delivery declined 30 cents, or 0.3 percent, to $99.06 a barrel at 1:08 p.m. on the New York Mercantile Exchange.

February $115 calls were the most active options traded in the previous session, with 7,862 lots changing hands. They declined 7 cents to 27 cents a barrel. The next-most active options, February $90 puts, rose 22 cents to 63 cents on volume of 7,479 contracts.

Open interest was highest for December 2012 $150 calls with 37,830 contracts. Next were December 2012 $80 puts with 37,159 contracts and December 2012 $100 calls with 32,346.

The exchange distributes real-time data for electronic trading and releases information the next business day on floor trading, where the bulk of options trading occurs.

--Editors: Richard Stubbe, Charlotte Porter

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


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