Bloomberg News

Oil Options Volatility Gains as Crude Rises to Nine-Month High

February 22, 2012

Feb. 22 (Bloomberg) -- Oil options volatility increased as crude rose to a nine-month high in New York after International Atomic Energy Agency officials were denied access to an Iranian military base.

Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 30.7 as of 3 p.m. in New York, up from 30.6 yesterday.

Crude oil for April delivery increased 3 cents to $106.28 a barrel on the New York Mercantile Exchange, the highest settlement since May 4. Futures have gained 14 percent in the past year.

“We’re not seeing the futures volatility be very big,” Vince Lanci, owner of Echobay Partners LLC, a commodity option trading firm in Stamford, Connecticut, said by phone. “Since the implied predicts the future, people are concerned about the Iranian crisis.”

The most active options in electronic trading today were June $95 puts. They gained 13 cents to $2.18 a barrel with 2,955 contracts trading as of 3:05 p.m. in New York. Next were April $100 puts, which rose 6 cents to $1.03 a barrel on 2,481 lots. A contract covers 1,000 barrels of crude. Puts were 60 percent of the volume.

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.

Calls accounted for 61 percent of the volume yesterday. May $119 calls were the most actively traded options, with 10,073 lots changing hands. They rose 32 cents to $1.59 a barrel. The next-most active options, April $92 puts, fell 16 cents to 20 cents a barrel on volume of 8,000 lots.

Open interest was highest for December $80 puts with 42,426 contracts. Next were December $150 calls with 37,450 lots and December $100 calls with 34,550.

--Editors: Charlotte Porter, David Marino

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

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


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