Bloomberg News

Crude Options Volatility Jumps as Futures Drop on Stockpile Glut

May 30, 2012

Crude-oil options volatility jumped as the underlying futures tumbled to a seven-month low on speculation U.S. crude stockpiles climbed to the highest level since 1990.

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 30.34 percent at 4:55 p.m. on the New York Mercantile Exchange, up from 27.13 percent yesterday.

Crude oil for July delivery slipped $2.94, or 3.2 percent, to $87.82 a barrel on the Nymex, the lowest settlement since Oct. 21. Prices are down 16 percent this month, heading for the biggest drop since December 2008.

Futures fell as an Energy Department report tomorrow is projected to show U.S. supplies rose 1 million barrels to 383.5 million last week, according to analysts surveyed by Bloomberg. Crude inventories climbed in the previous nine reports from the Energy Department.

The most active oil options in electronic trading today were July $80 puts, which gained 30 cents to 44 cents a barrel at 5:01 p.m. with 6,452 lots trading. July $85 puts were the second-most active options, with 3,656 lots changing hands as they rose 83 cents to $1.35.

Puts accounted for 54 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 60 percent of the 88,118 trades in the previous session. July $80 puts were the most actively traded, with 5,386 lots changing hands. They fell 5 cents to 14 cents a barrel. The next-most active options, July $100 calls, fell 5 cents to 13 cents on volume of 4,151.

Open interest was highest for December $80 puts with 43,892 contracts. Next were December $150 calls with 35,943 lots and December $70 puts with 35,442.

To contact the reporter on this story: Gene Laverty in Calgary at glaverty@bloomberg.net

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


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