Bloomberg News

Options Volatility Rises as Oil Slides on Global Demand Outlook

November 13, 2012

Crude oil options volatility rose as futures slipped after the International Energy Agency reduced its world oil-demand forecast for the quarter and a survey projected U.S. supplies jumped to a three-month high.

Implied volatility for at-the-money options expiring in January, a measure of expected price swings in futures and a gauge of options prices, was 30.6 percent on the New York Mercantile Exchange as of 3:35 p.m., an increase from 30.4 percent yesterday.

January-delivery crude oil fell 23 cents to settle at $85.84 a barrel on the Nymex.

Global consumption in the fourth quarter will average 90.1 million barrels a day, which is 290,000 barrels a day, or 0.3 percent, less than previously forecast, the Paris-based energy agency said in a monthly report today.

“The IEA report is playing into the weak demand sentiment,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “A lot of people are nervous.”

U.S. oil supplies probably rose 2.5 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg.

The most active options in electronic trading today were December $85 puts, which fell 33 cents to 3 cents a barrel on volume of 8,356 lots at 3:43 p.m. May $50 puts were the second- most active, with 3,702 lots exchanged as they held steady at 13 cents a barrel.

Bets that prices would fall, or puts, accounted for 56 percent of the 72,995 lots traded.

Exchange Data

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 53 percent of the 151,555 contracts traded.

December $84 puts were the most actively traded options yesterday with 25,196 contracts. They fell 17 cents to 12 cents a barrel. December $85 puts declined 19 cents to 33 cents on volume of 12,864 lots.

Open interest was highest for December $120 calls, with 68,068 contracts. Next were December $125 calls, with 46,020 lots, and December $115 calls with 42,060.

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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