Bloomberg News

Crude Options Volatility Falls as Oil Gains for Third Day

June 11, 2012

Crude-oil options volatility rose to the highest level in a week as underlying futures slid to an eight-month low October on concern the European debt crisis will spread, slowing the global recovery and 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 38.4 percent at 3:20 p.m. on the New York Mercantile Exchange, up from 35.08 yesterday. Volatility reached 40.6 on June 1, the highest level since Oct. 20.

Crude oil for July delivery fell $1.40, or 1.7 percent, to settle at $82.70 a barrel on the Nymex.

Spain became the fourth of 17 euro-area nations to seek emergency assistance last weekend, the most recent sign of fiscal stress in a regional debt crisis that started in Greece in 2009. Greek voters go to the polls this weekend to decide whether to honor that country’s international bailout.

The most active oil options in electronic trading today were September $65 puts, which rose 14 cents to 73 cents a barrel at 3:26 p.m. with 3,288 lots trading. July $80 puts were the second-most active options, with 3,059 lots changing hands as they advanced 31 cents to 78 cents.

Puts accounted for the four most active options and 56 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 134,762 trades in the previous session. July $75 puts were the most actively traded, with 9,703 lots changing hands. They were unchanged at 6 cents a barrel. The next-most active options, July $77 puts, gained 2 cents to 15 cents on volume of 6,392.

Open interest was highest for December $80 puts with 50,854 contracts. Next were December $150 calls with 36,029 lots and December $70 puts with 35,887.

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


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