Bloomberg News

Crude Options Volatility Falls as Oil Gains for Third Day

June 13, 2012

Crude-oil options volatility fell as underlying futures slid to an eight-month low after reports signaled economic softening in the U.S. and in the 17-nation euro group.

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 35.1 percent at 3:49 p.m. on the New York Mercantile Exchange, down from 36.6 yesterday. Volatility reached 40.6 on June 1, the highest since Oct. 20.

Crude oil for July delivery fell 70 cents to $82.62 a barrel on the Nymex, the lowest settlement since Oct. 6. Oil for delivery in August also lost 70 cents to $82.92.

Oil fell as equities declined after a Commerce Department report showed weakening U.S. retail sales and as euro-area industrial production dropped for a second month in April. The Standard & Poor’s 500 Index was down 0.8 percent at 3:56 p.m. in New York.

The most active oil options in electronic trading today were August $60 puts, which were unchanged at 7 cents a barrel at 4:14 p.m. with 5,492 lots trading. July $80 puts were the second-most active options, with 4,273 lots changing hands as they declined 5 cents to 23 cents.

Puts accounted for 55 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.

Calls accounted for 54 percent of the 157,142 trades in the previous session. July $75 puts were the most actively traded, with 6,578 lots changing hands. They fell 3 cents to 2 cents. The next-most active options, September $75 puts, lost 18 cents to $2.24 on volume of 5,971.

Open interest was highest for December $80 puts with 50,805 contracts. Next were December $100 calls with 39,967 lots and December $70 puts with 36,615.

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


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