Bloomberg News

Oil Options Volatility Falls as Futures Decline on Debt Concern

July 20, 2012

Oil options volatility fell as underlying futures retreated for the first time in eight days.

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 32.3 percent at 4:15 p.m. on the New York Mercantile Exchange, down from 33.6 yesterday.

Crude oil for September delivery declined $1.14, or 1.2 percent, to settle at $91.83 a barrel on the Nymex, while the front-month August contract lost $1.22 to $91.44.

Futures fell on growing concern that Europe’s debt crisis, slowing growth in China and a struggling U.S. economy will lower fuel demand. The euro touched a two-year low against the dollar, reducing the investment appeal of commodities.

The most active options in electronic trading today were October $130 calls, which rose 1 cent to 12 cents a barrel at 4:19 p.m. with 2,055 lots trading. September $115 calls were the second-most active options, with 1,851 lots changing hands as they fell 3 cents to 13 cents a barrel.

Calls accounted for 59 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.

In the previous session, bullish bets accounted 66 percent of the 207,142 contracts traded in the previous session.

March $140 calls tied for the most actively traded options yesterday, with 10,000 lots changing hands. They rose 10 cents to 53 cents a barrel. March $150 calls advanced 6 cents to 34 cents on volume of 10,000.

Open interest was highest for December $80 puts with 43,209 contracts. Next were December $120 calls with 39,241 lots and December $100 calls with 38,546.

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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