Bloomberg News

Crude Options Volatility Rises as Futures Slide to Six-Week Low

February 02, 2012

Feb. 2 (Bloomberg) -- Crude oil options volatility rose as underlying futures fell to the lowest level in six weeks.

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 29.4 as of 2 p.m. in New York, up from 28.1 yesterday.

Crude for March delivery fell 1.9 percent to $95.80 a barrel at 2:17 p.m. on the New York Mercantile Exchange, after touching $95.44, the lowest intraday price since Dec. 20. Since then, the front-month contract has traded in a range of about $9, between a low of $94.14 and a high of $103.74.

“There is fear of a breakout on the downside of the range, but $94 has still been the low,” said Ray Carbone, president of Paramount Options Inc. in New York. “The problem with a range- bound market is it loses interest.”

The most active options in electronic trading today were March $90 puts, with 3,347 lots changing hands at 2:21 p.m. They rose 17 cents to 47 cents a barrel. March $94 puts, the second- most active options, gained 49 cents to $1.35 with 2,103 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 52 percent of electronic trading volume and were the three most-active contracts.

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.

Bearish options accounted for 54 percent of volume in the previous session. June $90 puts were the most actively traded, with 11,710 lots changing hands as they rose 16 cents to $3.61 a barrel. The next-most active options, June $95 puts, gained 24 cents to $5.24 on volume of 5,537 lots.

Open interest was highest for December $80 puts with 42,195 contracts. Next were December $150 calls with 36,977 lots and December $100 calls with 33,425.

--With assistance from Mark Shenk 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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