Bloomberg News

Crude Oil Options Volatility Rises in Middle-East Tension

November 16, 2012

Crude oil options volatility rose along with the underlying futures on concern that Middle East crude shipments may be endangered by the clash between Israel and Hamas.

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 29.51 as of 3:35 p.m. on the New York Mercantile Exchange, up from 28.63 yesterday.

Crude oil for December delivery, which expired today, advanced $1.22, or 1.4 percent, to $86.67 on the Nymex, the highest settlement since Nov. 6. Israel extended its bombing of Gaza while Palestinian missiles struck areas near Jerusalem and Tel Aviv.

The most active options in electronic trading today were January $100 calls, which gained 10 cents to 30 cents a barrel on volume of 2,794 lots at 2:32 p.m. January $95 calls were the second-most active, with 1,894 lots exchanged as they increased 20 cents to 61 cents.

Bets that prices would rise, or calls, accounted for 59 percent of the 46,093 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, bullish bets made up 57 percent of the 118,953 contracts traded.

January $75 puts were the most actively traded options yesterday with 6,966 contracts. They were unchanged at 26 cents a barrel. January $100 calls dropped 10 cents to 20 cents on volume of 6,537 lots.

Open interest was highest for January $105 calls, with 40,310 contracts. Next were January $110 calls with 38,473 lots and January $60 puts with 34,883.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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