Bloomberg News

Oil Options Volatility Rises as Futures Slide Out of Range

October 19, 2012

Crude oil options volatility rose as underlying futures broke out of the range they had been trading in all week and slid 2.2 percent.

Implied volatility for options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 29.24 percent at 3:20 p.m. in New York, after being at 27.99 percent the prior two days.

December-delivery crude oil fell $2.05 to settle at $90.05 a barrel on the New York Mercantile Exchange. The largest move in the previous five days was 24 cents.

“We’re up a little bit especially since we sold off,” week,’’ said Fred Rigolini, vice president of Paramount Options Inc. in New York. “We’re breaking out of the range, after being between $91 and $93 all week.”

The most active options in electronic trading today were December $85 puts, which rose 41 cents to $1.02 a barrel at 3:26 p.m. with 3,182 lots trading. December $90 puts were the second- most active, with 2,892 lots exchanged as they advanced 80 cents to $2.55 a barrel.

“We saw December $70, $75 and $78 puts trading out and December $75 and $78 trading as a put spread,” Rigolini said.

Puts accounted for 53 percent of the 50,694 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, puts made up 58 percent of the 124,736 contracts traded.

December $80 puts were the most actively traded options yesterday with 8,023 lots. They fell 7 cents to 18 cents a barrel. December $75 puts declined 3 cents to 5 cents on volume of 7,550 lots.

Open interest was highest for December $120 calls with 67,857 contracts. Next were December $80 puts with 52,461 lots and December $125 calls with 45,711.

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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