Bloomberg News

Crude Options Volatility Falls as Futures Rise on Iran Oil Ban

January 23, 2012

Jan. 23 (Bloomberg) -- Crude oil options volatility fell for the first time in three days as underlying futures rose after the European Union agree to ban oil imports from Iran.

Implied volatility for at-the-money options expiring in March, a measure of expected price swings in futures and a gauge of options prices, was 29.8 as of 3:30 p.m. in New York, down from 30.3 on Jan. 20. March crude oil rose as much as 1.9 percent in intraday trading before settling 1.3 percent higher.

“We rallied back so volatility came off,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Crude for March delivery rose $1.25 to settle at $99.58 a barrel on the New York Mercantile Exchange, the first increase in four days.

The most active options in electronic trading today were March $90 puts, with 4,005 lots changing hands at 3:44 p.m. They fell 31 cents to 45 cents a barrel. March $95 puts, the second- most active option, lost 52 cents to $1.30 with 1,855 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 55 percent of electronic trading volume and were the four most-active contracts.

“There’s been a lot of downside put buying, March $80 and $90 puts and April $63 puts, with people squaring positions that might have been short,” Rigolini said. “There was some selling of March $115 calls. But there were no real directional plays.”

Previous Session

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.

The five most active options Jan. 20 were puts. Bearish options accounted for 54 percent of volume. March $90 puts were the most actively traded, with 12,949 lots changing hands as they rose 23 cents to 76 cents a barrel. The next-most active options, March $95 puts, rose 54 cents to $1.82 on volume of 5,414 lots.

Open interest was highest for December $80 puts with 38,929 contracts. Next were December $150 calls with 36,908 lots and December $100 calls with 32,634.

--With assistance from Moming Zhou in New York. Editors: David Marino, Charlotte Porter

To contact the reporter on this story: Barbara J. Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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