Crude-oil options volatility rose to the highest level this week as underlying futures fell as much as 3.3 percent on concern that the deepening European debt crisis and China’s growth slowdown threaten global fuel demand.
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 35.12 percent at 1:10 p.m. on the New York Mercantile Exchange, up from 33.41 yesterday. Volatility reached 40.56 on June 1, the highest level since Oct. 20.
“The volatility came down as the market stabilized, but the market is back down again today and only something very constructive out of Europe will give us a rally,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.
Crude oil for July delivery fell $1.27, or 1.5 percent, to $83.55 a barrel at 1:14 p.m. on the Nymex after touching $82.
China, the world’s second-biggest economy, cut borrowing costs yesterday for the first time since 2008 ahead of a report tomorrow on inflation, investment and output that may indicate the economy has slowed more than the government anticipated.
Spain is poised to be the fourth euro-area nation to seek emergency assistance as the region’s finance chiefs plan weekend talks on potential aid to shore up the nation’s lenders.
The most active oil options in electronic trading today were July $90 calls, which fell 9 cents to 8 cents a barrel at 1:23 p.m. with 2,610 lots trading. July $85 calls were the second-most active options, with 2,265 lots changing hands as they declined 68 cents to 91 cents.
Calls accounted for 67 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 54 percent of the 127,853 trades in the previous session. July $92 calls were the most actively traded, with 4,241 lots changing hands. They fell 2 cents to 7 cents a barrel. The next-most active options, November $110 calls, lost 1 cent to 83 cents on volume of 4,025.
Open interest was highest for December $80 puts with 51,015 contracts. Next were December $70 puts with 37,502 lots and December $150 calls with 36,028.
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