Bloomberg News

Crude Options Volatility Falls as Futures Gain for Fourth Day

July 27, 2012

Oil options volatility fell as underlying futures gained on speculation that the European Central Bank and the U.S. Federal Reserve will ease monetary policy to boost economic growth and curb the debt crisis.

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 29.98 percent at 4:19 p.m. on the New York Mercantile Exchange, down from 31.12 yesterday. It was the fourth consecutive decline.

Oil for September delivery climbed 74 cents to settle at $90.13 a barrel on the New York Mercantile Exchange. Prices gained 0.8 percent after ECB President Mario Draghi was said to be planning to hold talks with Bundesbank President Jens Weidmann on stimulus measures including bond purchases. ECB and Fed policy makers are scheduled to gather separately next week to discuss the economy.

The most active options in electronic trading today were September $80 puts, which fell 9 cents to 21 cents a barrel at 4:10 p.m. with 2,211 lots trading. September $83 puts were the second-most active options, with 1,965 lots changing hands as they declined 17 cents to 49 cents a barrel.

Puts 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, calls accounted for 52 percent of the 93,232 contracts traded.

September $85 puts were the most actively traded options yesterday, with 4,309 lots changing hands. They fell 21 cents to $1.05 a barrel. September $83 puts declined 14 cents to 66 cents on volume of 3,892.

Open interest was highest for December $80 puts with 42,412 contracts. Next were December $100 calls with 40,903 lots and December $120 calls with 38,583.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

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


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