Bloomberg News

Crude Options Volatility Falls as Oil Gains for Third Day

June 12, 2012

Crude-oil options volatility fell for the first time in four days as underlying futures advanced on speculation that the Federal Reserve will do more to stimulate the economy.

Implied volatility for at-the-money options expiring in August, a measure of expected price swings in futures and a gauge of options prices, was 36.3 percent at 3:30 p.m. on the New York Mercantile Exchange, down from 37.2 yesterday. Volatility reached 40.6 on June 1, the highest since Oct. 20.

Crude oil for July delivery gained 62 cents to settle at $83.32 a barrel on the Nymex, after falling the prior day to an eight-month low of $82.70. Oil for delivery in August also rose 62 cents to $83.62.

Federal Reserve Bank of Chicago President Charles Evans said he would support measures to generate faster job growth. Federal Reserve Bank of Atlanta President Dennis Lockhart said falling Treasury yields take pressure off the central bank for further action as policy makers prepare for a June 19-20 meeting of the policy-setting Federal Open Market Committee.

The most active oil options in electronic trading today were July $86 calls, which fell 6 cents to 25 cents a barrel at 2:20 p.m. with 2,569 lots trading. July $80 puts were the second-most active options, with 2,008 lots changing hands as they declined 27 cents to 28 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 52 percent of the 117,480 trades in the previous session. July $80 puts were the most actively traded, with 7,551 lots changing hands. They rose 8 cents to 55 cents. The next-most active options, December $100 calls, lost 23 cents to $2.30 on volume of 5,782.

Open interest was highest for December $80 puts with 50,851 contracts. Next were December $100 calls with 38,225 lots and December $70 puts with 36,643.

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


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