Bloomberg News

Oil Options Volatility Drops as Crude Falls on Europe Concerns

February 27, 2012

Oil options volatility declined for a second day after crude fell after the Group of 20 nations rebuffed calls from euro countries to increase international lending resources, adding to concern that Europe’s debt crisis will slow the economy.

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 29.4 as of 1:30 p.m. in New York, down from 30 on Feb. 24.

Crude oil for April delivery fell for the first time in eight days, losing 82 cents, or 0.8 percent, to $108.95 a barrel at 1:26 p.m. on the New York Mercantile Exchange after touching $108.24 earlier.

“You’re seeing a bit of a settling off the rally,” Fred Rigolini, vice president of Paramount Options Inc. in New York, said by telephone. “We’ve broken out of our range, the next test” is going to be around $112, and $115 after that, he said.

The most active options in electronic trading today were April $119 calls. They fell 24 cents to 33 cents a barrel with 2,462 contracts trading as of 1:44 p.m. in New York. Next were April $120 calls, which fell 19 cents to 30 cents a barrel on 1,753 lots. A contract covers 1,000 barrels of crude. Calls were 55 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 58 percent of the volume in the previous session. April $115 calls were the most actively traded options, with 8,314 lots changing hands. They gained 22 cents to $1.14 a barrel. The next-most active options, May $135 calls, rose 11 cents to 66 cents a barrel on volume of 5,792 lots.

Open interest was highest for December $80 puts with 45,986 contracts. Next were December $150 calls with 37,558 lots and December $100 calls with 34,560.

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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