Bloomberg News

Crude Options Fall With Underlying Futures on Inventory Forecast

November 27, 2012

Crude oil options volatility declined with the underlying futures as supplies were forecast to increase and Senate Majority Leader Harry Reid said little progress had been made in budget talks in Washington.

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 27.07 as of 4:40 p.m. on the New York Mercantile Exchange, down from 27.52 in the previous trading session.

Crude oil for January delivery fell 56 cents to settle at $87.18 a barrel on the New York Mercantile Exchange. Crude inventories probably increased last week by 350,000 barrels to 374.8 million, according to the median estimate of 11 analysts in a Bloomberg survey.

The budget debate and concern about the so-called fiscal cliff helped push oil lower. Congress returns from the Thanksgiving recess this week, seeking a budget deal to avoid $607 billion automatic tax increases and spending cuts from taking effect next year.

Democrats and Republicans have made little headway in negotiations, according to Reid, a Nevada-based Democrat.

Active Options

The most active options in electronic trading today were January $80 puts, which gained 2 cents to 25 cents a barrel on volume of 2,942 lots at 4:44 p.m. January $90 calls were the second-most active, with 2,152 lots exchanged as they declined 31 cents to 91 cents a barrel.

Puts accounted for 57 percent of the 36,614 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, puts made up 58 percent of the 69,234 lots traded.

January $80 puts were the most actively traded options yesterday with 3,059 contracts. They were unchanged at 23 cents a barrel. June $90 puts rose 22 cents to $7.22 on volume of 3,000 lots.

Open interest was highest for January $105 calls, with 46,654 contracts. Next were January $60 puts with 34,924 lots and January $110 calls with 31,504.

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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