Bloomberg News

Oil Options Volatility Little Changed as Futures Hold

April 17, 2012

Oil options volatility fell as the underlying futures climbed to a two-week high after Spain sold more debt than expected and the International Monetary Fund raised global growth forecasts.

Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 25.4 as of 3:15 p.m. on the New York Mercantile Exchange, down from 27.2 yesterday. The Standard & Poor’s 500 Index rose for the first time in three days.

“The stock market is rallying, WTI is rallying and that is bringing volatility down,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.

Crude oil for May delivery advanced $1.27 to $104.20 a barrel on the New York Mercantile Exchange, the highest settlement since April 2. Crude for June delivery gained $1.27 to $104.64. May futures expire April 20.

The IMF increased its outlook for global growth in 2012 to 3.5 percent from 3.3 percent and lifted its forecast for U.S. expansion to 2.1 percent from 1.8 percent. Spain sold 12-month and 18-month bills one day after yields on its 10-year bonds reached the highest level this year. German’s ZEW survey of investor confidence unexpectedly rose to a two-year high.

Electronic Trading

The most-active oil options in electronic trading today were June $130 calls, which were unchanged at 10 cents a barrel at 3:22 p.m. with 6,595 contracts trading. May $104 puts were the second-most active with 5,469 lots changing hands. They lost $1.21 to 4 cents a barrel.

Puts accounted for 53 percent of electronic trading volume. One contract covers 1,000 barrels of crude.

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 bets accounted for 54 percent of the 118,534 trades in the previous session. June $100 puts were the most actively traded, with 6,915 lots changing hands. They were down 14 cents to $1.97 a barrel. The next-most active options, May $100 puts, fell 15 cents to 4 cents on volume of 5,460.

Open interest was highest for December $80 puts with 46,763 contracts. Next were December $150 calls with 38,433 lots and June $140 calls with 34,391.

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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