Bloomberg News

Oil Options Volatility at Nine-Week Low as Futures Top $92

August 06, 2012

Oil options volatility fell to the lowest level since May 29 as futures reached a two-week high amid stronger equities and optimism that Europe’s debt crisis can be contained.

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 29.41 percent at 3:38 p.m. on the New York Mercantile Exchange, down from 30.72 Aug. 3.

“It’s down pretty significantly and that’s mostly attributable to the higher price and smaller range,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Crude oil for September delivery rose 80 cents to $92.20 a barrel on the Nymex, the highest settlement since July 19.

The dollar fell against most of its major counterparts, increasing the investment appeal of commodities. German Chancellor Angela Merkel’s government backed European Central Bank President Mario Draghi’s proposals on bond buying to help reduce borrowing costs in Spain and Italy.

The most active options in electronic trading today were October $80 puts, which fell 21 cents to 46 cents a barrel at 3:45 p.m. with 1,618 lots trading. September $98 calls were the second-most active options, with 1290 lots changing hands as they declined 6 cents to 32 cents a barrel.

Calls accounted for 56 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

In the previous session, bullish bets accounted for 65 percent of the 130,787 contracts traded.

September $100 calls were the most actively traded options Aug. 3, with 8,593 lots changing hands. They rose 17 cents to 24 cents a barrel. September $95 calls advanced 64 cents to 85 cents on volume of 6,669.

Open interest was highest for December $100 calls with 43,224 contracts. Next were December $80 puts with 41,729 lots and December $120 calls with 39,711.

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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