Bloomberg News

Oil Options Volatility Falls as Futures Increase for Third Day

March 09, 2012

Crude oil options volatility fell as underlying futures rose for a third day after the U.S. boosted payrolls more than forecast, bolstering optimism for growth.

Implied volatility for at-the-money options expiring in May, a measure of expected price swings in futures and a gauge of options prices, was 27.8 as of 3 p.m. in New York, down from 28.7 yesterday.

Crude for April delivery rose 82 cents, or 0.8 percent, to settle at $107.40 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. May futures gained 81 cents, or 0.8 percent, to $107.87 a barrel.

The most active options in electronic trading today were June $73 puts, with 6,176 lots changing hands at 3:04 p.m. They fell 1 cent to 10 cents a barrel. April $105 puts, the second- most active options, declined 34 cents to 57 cents with 3,381 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 60 percent of electronic trading volume.

The exchange distributes real-time data for electronic trading and releases information the next business day on floor trading, where the bulk of options trading occurs.

Bullish options accounted for 56 percent of the 126,396 trades from the previous session. April $105 puts were the most actively traded, with 4,780 lots changing hands as they fell 36 cents to 91 cents a barrel. The next-most active options, April $115 calls, dropped 2 cents to 10 cents on volume of 4,686.

Open interest was highest for December $80 puts with 46,401 contracts. Next were December $150 calls with 38,629 lots and December $100 calls with 34,927.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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