Bloomberg News

Crude Options Volatility Rises as Oil Futures Little Changed

March 05, 2012

Crude oil options volatility rose to the highest level in seven sessions as underlying futures were little changed after fluctuating much of the day on lower volume.

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 4 p.m. in New York, up from 28.3 on March 2.

Crude for March delivery rose 2 cents to settle at $106.72 a barrel on the New York Mercantile Exchange. Since Feb. 17, the front-month contract has traded in a range of $104.26 and $110.55. Preliminary volume in electronic trading for crude oil was 445,242 contracts as of 3:08 p.m. in New York, 28 percent below the three-month average.

“We’re stuck in a relatively small range,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

The most active options in electronic trading today were April $100 puts, with 1,442 lots changing hands at 3:58 p.m. They fell 7 cents to 34 cents a barrel. April $103 puts, the second-most active options, declined 18 cents to 75 cents with 769 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 57 percent of electronic trading 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.

Bearish options accounted for 58 percent of the 129,061 trades from the previous session. April $100 puts were the most actively traded, with 8,353 lots changing hands as they rose 13 cents to 41 cents a barrel. The next-most active options, April $95 puts, gained 3 cents to 11 cents on volume of 5,844.

Open interest was highest for December $80 puts with 46,154 contracts. Next were December $150 calls with 38,687 lots and December $100 calls with 34,926.

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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