Bloomberg News

Oil Options Volatility Steady as Futures Advance for Sixth Day

July 18, 2012

Oil options volatility was little changed as underlying futures advanced for a sixth day.

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 32.1 percent at 4:10 p.m. on the New York Mercantile Exchange, down from 32.4 percent yesterday.

Volatility has changed less than one percentage point since July 12 as futures traded between $84.21 and $90.04.

The stagnant volatility indicates lowered expectations that the Federal Reserve will institute a third round of quantitative easing, or QE3, before the November presidential election, said Vince Lanci, managing partner at Echobay Partners LLC, a commodity investment firm in Stamford, Connecticut.

“Options participants are less likely to put on positions as a result,” Lanci said. “Remember, this is implied volatility and market perception of the future. It’s telling you we’re going to be rangebound for awhile.”

Crude oil for September delivery rose 63 cents to settle at $90.17 a barrel on the Nymex. Prices have climbed six straight days, the longest stretch of gains since April 27.

The most active options in electronic trading today were September $120 calls, which fell 2 cents to 7 cents a barrel at 4:17 p.m. with 1,855 lots trading. September $115 calls were the second-most active options, with 1,581 lots changing hands as they dropped 2 cent to 11 cents a barrel.

Puts More Active

Puts accounted for 51 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 58 percent of the 105,393 contracts traded in the previous session.

September $115 calls were the most actively traded yesterday, with 7,301 lots changing hands. They rose 2 cents to 13 cents a barrel. The next-most active options, September $80 puts, retreated 14 cents to 55 cents on volume of 6,078.

Open interest was highest for December $80 puts with 44,115 contracts. Next were December $120 calls with 40,769 lots and December $100 calls with 38,734.

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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