Bloomberg News

Oil Options Fall as Crude Gains on Israel Unrest, Budget Talks

November 19, 2012

Nov. 19 (Bloomberg) --Crude oil options volatility fell as futures rose on concern that Israel’s attacks on the Gaza Strip will foment unrest in the Middle East, and on optimism that U.S. lawmakers can reach a budget compromise.

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 28.64 percent on the New York Mercantile Exchange as of 1:38 p.m., down from 29.76 percent on Nov. 16.

“It’s coming off because of the higher prices and we’re moving out of a range,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

January-delivery crude oil rose $2.59, or 3 percent, to $89.51 a barrel on the Nymex.

Israeli ground forces are poised to invade the Gaza Strip for the first time in almost four years amid efforts by Egypt and Turkey to help end the conflict in which 96 Palestinians and three Israelis have been killed.

President Barack Obama is negotiating with a divided Congress to try to avert $607 billion in automatic tax increases and spending cuts. Obama told reporters during a news conference in Bangkok yesterday that he is “confident we can get our fiscal situation dealt with.”

The most active options in electronic trading today were January $105 calls, which rose 4 cents to 22 cents a barrel on volume of 2,862 lots at 1:44 p.m. January $75 puts were the second-most active, with 2,848 lots exchanged as they fell 12 cents to 7 cents a barrel.

Bets that prices would rise, or calls, accounted for 53 percent trading volume.

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, bullish bets made up 52 percent of the 113,461 contracts traded.

January $75 puts were the most actively traded options on Nov. 16, with 9,373 contracts. They fell 7 cents to 19 cents a barrel. January $100 calls advanced 10 cents to 30 cents on volume of 6,210 lots.

Open interest was highest for January $105 calls, with 42,380 contracts. Next were January $110 calls, with 38,539 lots, and January $60 puts, with 34,948.

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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