Bloomberg News

Crude Options Volatility Falls as Oil Futures Advance

June 14, 2012

Crude-oil options volatility fell as underlying futures rose from an eight-month low on speculation that the Federal Reserve will act to stimulate growth.

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 34.35 at 1:15 p.m. on the New York Mercantile Exchange, down from 35.76 yesterday. It was the third consecutive decline. Volatility reached 40.6 on June 1, the highest since Oct. 20.

Crude oil for July delivery rose $1.02, or 1.2 percent, to $83.64 a barrel at 1:16 p.m. on the Nymex. Oil for delivery in August advanced $1 to $83.92.

Speculation that the Fed will act rose after the Labor Department reported that consumer prices sank in May by the most in more than three years and claims for jobless benefits climbed by 6,000 to 386,000 in the week ended June 9.The policy-setting Federal Open Market Committee is scheduled to meet June 19-20.

The most active oil options in electronic trading today were July $85 calls, which rose 3 cents to 19 cents a barrel at 1:44 p.m. with 4,539 lots trading. July $80 puts were the second-most active options, with 2,289 lots changing hands as they declined 14 cents to 6 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.

Puts accounted for 57 percent of the 144,377 trades in the previous session. July $80 puts were the most actively traded, with 9,217 lots changing hands. They fell 8 cents to 20 cents. The next-most active options, August $60 puts, were unchanged at 7 cents on volume of 6,042.

Open interest was highest for December $80 puts with 50,255 contracts. Next were December $100 calls with 40,027 lots and December $70 puts with 37,084.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

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


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