Bloomberg News

Crude Options Volatility Falls as Oil Rises

May 25, 2012

Crude-oil options volatility fell as the underlying futures advanced for a second day.

Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 26.7 percent at 3 p.m. on the New York Mercantile Exchange, down from 26.9 percent yesterday.

“We held ahead of the weekend, but we’re just slightly down because we’re kind of in a tight range today,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Floor trading is closed on May 28, the U.S. Memorial Day holiday.

Crude oil for July delivery rose 20 cents to settle at $90.86 a barrel on the Nymex, below $91 for the third straight day. Prices are down 17 percent since their year-to-date high settlement of $109.77 on Feb. 24.

Oil rose on reports that U.S. consumer confidence gained and that the United Nations’ atomic agency found evidence Iran boosted its output of enriched uranium, which could be used for a nuclear weapon.

The most active oil options in electronic trading today were July $100 calls, which were unchanged at 17 cents a barrel at 3:08 p.m. with 2,407 lots trading. July $80 puts were the second-most active options with 1,492 lots changing hands as they fell 7 cents to 19 cents.

Bullish Bets

Calls accounted for 57 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.

Bullish bets accounted for 55 percent of the 136,430 trades in the previous session. July $90 puts were the most actively traded, with 5,349 lots changing hands. They fell 43 cents to $2.12 a barrel. The next-most active options, September $110 calls, rose 3 cents to 48 cents on volume of 5,188.

Open interest was highest for December $80 puts with 41,044 contracts. Next were December $150 calls with 35,944 lots and December $70 puts with 35,459.

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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