Bloomberg News

Crude Options Volatility Declines a Fifth Day as Futures Rise

March 13, 2012

Crude oil options volatility fell for a fifth consecutive session as underlying futures rose after U.S. retail sales in February increased the most in five months.

Implied volatility for at-the-money options expiring in May, a measure of expected price swings in futures and a gauge of options prices, sank to 26.7 percent as of 2:30 p.m. in New York, down from 27 percent yesterday.

“We’re getting a little more range bound,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “With no breakout here, people are reluctant to buy options.”

Crude for April delivery rose 37 cents to settle at $106.71 a barrel on the New York Mercantile Exchange. The May contract increased 40 cents to $107.24. Since Feb. 21, the front-month contract has traded in a range of $104.26 to $110.55.

The most-active options in electronic trading today were April $105 puts, with 2,395 lots changing hands as of 2:40 p.m. They fell 27 cents to 36 cents a barrel. June $73 puts, the second-most active options, declined 3 cents to 6 cents with 2,026 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 59 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.

Bearish options accounted for 54 percent of the 92,592 trades from the previous session. April $100 puts were the most actively traded, with 5,240 lots changing hands as they rose 1 cent to 9 cents a barrel. The next-most active options, April $102 puts, gained 2 cents to 18 cents on volume of 4,102.

Open interest was highest for December $80 puts with 46,401 contracts. Next were December $150 calls with 38,632 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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