Bloomberg News

Crude Oil Options Fall as Futures Slide Below $86 a Barrel

October 24, 2012

Crude oil options volatility declined on speculation prices may stabilize after underlying futures slid for a fifth straight day to a three-month low.

Implied volatility for at-the-money options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 31.1 percent on the New York Mercantile Exchange at 4:15 p.m., down from 32.6 percent yesterday.

“It’s odd that it should go down when crude is down almost a dollar and took out yesterday’s lows so the downtrend is still intact,” said Jim Colburn, a vice president and energy options broker at Jefferies Bache LLC in New York. “The fear that was in this market yesterday is gone. Even though the price is telling you down, the options market is saying calm or, maybe, we don’t go down.”

December-delivery crude oil fell 94 cents, or 1.1 percent, to $85.73 a barrel, the lowest settlement since July 10. Prices have declined 6.9 percent in five days of losses.

Most-Active

The most active options in electronic trading today were January $120 calls, which slid 1 cent to 6 cents a barrel with 3,248 lots trading at 4:18 p.m. New York time. December $85 puts were the second-most active, with 2,328 lots exchanged as they rose 19 cents to $2.21 a barrel.

Calls amounted to 55 percent of the 61,980 lots traded.

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 59 percent of the 245,834 contracts traded.

December $75 puts were the most actively traded options yesterday with 18,557 contracts. They advanced 4 cents to 18 cents a barrel. December $80 puts rose 17 cents to 68 cents on volume of 11,633 lots.

Open interest was highest for December $120 calls with 67,851 contracts. Next were December $80 puts with 48,001 lots and December $125 calls with 45,872.

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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