Crude oil options volatility jumped to a 10-day high as the underlying futures sank to the lowest level in two months in the biggest retreat since June.
Implied volatility for options expiring in November, a measure of expected price swings in futures and a gauge of options prices, was 31.9 percent as of 2:40 p.m. in New York, up from 28.7 percent yesterday.
“The lower we go, the firmer volatility becomes,” said Ray Carbone, president of Paramount Options Inc. in New York.
Crude oil for November delivery fell $3.75, or 4.1 percent, to settle at $88.14 a barrel at 2:06 p.m. on the New York Mercantile Exchange, the lowest level since Aug. 2 and biggest decline since June 21.
The most active options in electronic trading today were December $100 calls, bets that prices would rise, which fell 51 cents to 64 cents a barrel at 2:48 p.m. with 2,464 lots trading. November $80 puts were the second-most active, with 2,213 lots exchanged as they rose 21 cents to 27 cents a barrel.
Bets that prices would fall accounted for 51 percent of the 55,927 contracts in electronic trading. One contract covers 1,000 barrels of oil.
The exchange distributes real-time data for electronic trading and releases information the next business day on open- outcry volume, where the bulk of options activity occurs.
In the previous session, bullish bets made up 62 percent of the 160,135 contracts traded.
November $105 calls were the most actively traded options with 28,788 lots changing hands. They fell 5 cents to 7 cents a barrel. November $100 calls declined 9 cents to 21 cents on volume of 14,907.
Open interest was highest for December $120 calls with 47,537 contracts. Next were December $80 puts with 45,651 lots and December $125 calls with 44,317.
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