Bloomberg News

Crude Options Volatility Rises as Futures Drop

May 15, 2012

Crude-oil options volatility rose as the underlying futures dropped to the lowest level in almost five months.

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 29.8 percent at 3:45 p.m. on the New York Mercantile Exchange, up from 28.7 yesterday. Volatility has increased from below 21 percent on April 27 as futures prices have dropped $10.95 a barrel.

“Crude came off kind of orderly,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “It was a slow decline all day.”

Crude oil for June delivery fell 80 cents to settle at $93.98 a barrel on the Nymex. It was the lowest close since Dec. 19 and third consecutive decline.

The most-active oil options in electronic trading today were June $90 puts, which rose 8 cents to 20 cents a barrel at 4:25 p.m. with 4,662 lots trading. June $95 calls were the second-most active options with 2,246 lots changing hands as they fell 72 cents to 32 cents.

Calls 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 53 percent of the 167,669 trades in the previous session. June $90 puts were the most actively traded, with 8,094 lots changing hands. They rose 5 cents to 12 cents a barrel. The next-most active options, September $70 puts, added 7 cents to 40 cents on volume of 8,064.

Open interest was highest for December $80 puts with 39,166 contracts. Next were December $70 puts with 36,633 lots and December $150 calls with 36,056.

To contact the reporters 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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