Bloomberg News

Oil Options Volatility Rises as Furtures Slide

July 10, 2012

Crude-oil options volatility rose as underlying September futures slid 2.4 percent after Norway ended a strike that had threatened oil production and China reduced purchases of raw materials.

Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, was 35.56 percent at 3:40 p.m. on the New York Mercantile Exchange, up from 35.34 percent yesterday. September options are now more active than August.

Crude oil for September delivery declined $2.07, or 2.4 percent, to settle at $84.30 a barrel on the Nymex, the third loss in four days.

Futures fell as Norway’s government ordered compulsory arbitration in the labor dispute, preventing a platform workers’ lockout scheduled to start at midnight yesterday. China’s net crude imports slid to the lowest level this year, according to customs data today.

The most active options in electronic trading today were August $80 puts, which rose 19 cents to 43 cents a barrel at 3:47 p.m. with 2,012 lots trading. August $82 puts were the second-most active options, with 1,946 lots changing hands as they gained 39 cents to 90 cents a barrel.

Bearish Bets

Puts accounted for 57 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.

Calls accounted for 56 percent of the 121,853 contracts traded in the previous session.

August $77 puts were the most actively traded, with 7,463 lots changing hands. They lost 13 cents to 7 cents a barrel. The next-most active options, August $90 calls, rose 16 cents to 50 cents on volume of 5,269.

Open interest was highest for December $120 calls with 55,322 contracts. Next were December $80 puts with 44,496 lots and December $110 calls with 39,026.

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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