Bloomberg News

Oil Options Fall as Futures Trade in Narrow Range on Expiratiion

October 17, 2012

Crude oil options volatility declined as underlying futures changed by less than 25 cents for a fourth day, the longest string of such moves since 2003.

Implied volatility for options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 29.43 percent at 4:20 p.m. in New York, down from 30.84 yesterday. November options expired today.

Crude oil for December delivery rose 5 cents to settle at $92.59 a barrel on the New York Mercantile Exchange, while the November contract gained 3 cents to $92.12. The settlement price for front-month futures has changed less than 25 cents for four consecutive days, the first time that’s happened since October 2003, data compiled by Bloomberg show.

The most active options in electronic trading today were December $85 puts, which dropped 12 cents to 74 cents a barrel at 4:26 p.m. with 2,424 lots trading. November $92 puts were the second-most active, with 2,356 lots exchanged as they declined 57 cents a barrel to 8 cents.

Bearish bets accounted for 60 percent of the 55,040 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, bets that prices would fall made up 73 percent of the 134,331 contracts traded.

January $60 puts were the most actively traded options yesterday with 35,038 lots changing hands. They fell 4 cents to 6 cents a barrel. November $90 puts declined 17 cents to 10 cents on volume of 5,412.

Open interest was highest for December $120 calls with 67,839 contracts. Next were December $80 puts with 51,604 lots and December $125 calls with 45,418.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; 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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