Bloomberg News

Crude Options Volatility Falls as Futures Rise on Job Report

February 03, 2012

Feb. 3 (Bloomberg) -- Crude oil options volatility fell as underlying futures advanced for the first time since Jan. 26 after the U.S. jobless rate dropped to a three-year low.

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 26.6 as of 2:30 p.m. in New York, down from 28.5 yesterday.

“It’s definitely down on the day because we’re higher today and back in the range,” said Fred Rigolini, vice president of Paramount Options Inc. in New York

Crude for March delivery rose 1.24 cents, or 1.3 percent, to $97.60 a barrel at 2:10 p.m. on the New York Mercantile Exchange, after touching $95.44 yesterday, 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.

The most active options in electronic trading today were March $90 puts, with 4,200 lots changing hands at 2:19 p.m. They fell 19 cents to 20 cents a barrel. April $85 puts, the second- most active options, lost 23 cents to 56 cents with 2,708 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 56 percent of electronic trading volume and were four of the five most-active contracts.

“We saw some trading in April and June $85 puts, some pretty decent buying in April $130 calls, some selling in the April $115 calls,” Rigolini said. “In June $110 calls, we saw both buying and selling.”

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 52 percent of volume in the previous session. March $90 puts were the most actively traded, with 8,684 lots changing hands as they rose 9 cents to 39 cents a barrel. The next-most active options, March $85 puts, gained 1 cent to 10 cents on volume of 6,516 lots.

Open interest was highest for December $80 puts with 42,193 contracts. Next were December $150 calls with 37,258 lots and December $100 calls with 33,825.

--With assistance from Mark Shenk in New York. Editors: Charlotte Porter, David Marino

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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