Bloomberg News

Oil Options Volatility Falls as Futures Rise

July 03, 2012

Crude-oil options volatility was little changed as underlying futures surged on speculation that central banks will ease monetary policies and Iran oil sanctions will reduce supplies.

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 34.71 percent at 3 p.m. on the New York Mercantile Exchange, up from 34.42 percent yesterday.

Crude oil for August delivery rose $3.91 to $87.66 a barrel on the Nymex, the highest settlement price since May 30.

Futures rose as the European Central Bank was forecast to reduce interest rates this week, a state-controlled newspaper in China called for a cut in bank reserve ratios and Iran threatened to block tanker traffic in the Strait of Hormuz.

The most active options in electronic trading today were August $95 calls, which rose 30 cents to 42 cents a barrel at 3:05 p.m. with 5,572 lots trading. September $115 calls were the second-most active options, with 5,004 lots changing hands as they gained 10 cents to 18 cents.

Calls accounted for four of the most heavily traded options and 63 percent of total 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 56 percent of the 154,351 contracts traded in the previous session. August $92 calls were the most actively traded, with 11,747 lots changing hands. They fell 9 cents to 24 cents. The next-most active options, September $65 puts, advanced 2 cents to 18 cents on volume of 9,410.

Open interest was highest for December $80 puts with 44,694 contracts. Next were December $120 calls with 40,357 lots and December $70 puts with 35,711.

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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