Bloomberg News

Crude Oil Options Volatility Falls as U.S. Inventory Declines

November 21, 2012

Nov. 21 (Bloomberg) --Crude oil options volatility fell as underlying futures advanced after U.S. inventories dropped for the first time in three weeks.

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 27.72 percent on the New York Mercantile Exchange as of 2:50 p.m., down from 27.85 percent yesterday. January-delivery crude oil rose 63 cents, or 0.7 percent, to $87.38 a barrel on the Nymex.

Oil inventories declined 1.47 million barrels, or 0.4 percent, to 374.5 million in the week ended Nov. 16, according to Energy Department data.

“Volatility was lower most of the day because we’re sort of range-bound again,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

The most active options in electronic trading today were January $80 puts, which fell 16 cents to 34 cents a barrel on volume of 1,896 lots at 3:34 p.m. January $105 calls were the second-most active, with 1,891 lots exchanged as they slid 1 cent to 11 cents a barrel.

Bets that prices would rise, or calls, accounted for 56 percent of trading volume.

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 172,728 contracts traded.

January $105 calls were the most actively traded options yesterday with 13,635 contracts. They fell 11 cents to 10 cents a barrel. January $110 calls declined 7 cents to 7 cents on volume of 11,695 lots.

Open interest was highest for January $105 calls, with 47,966 contracts. Next were January $60 puts, with 34,935 lots, and January $110 calls, with 31,176.

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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