Crude oil options volatility rose as the underlying futures declined while U.S. leaders remained at odds in negotiations to avert the so-called fiscal cliff.
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 27.23 percent on the New York Mercantile Exchange as of 3:50 p.m., an increase from 26.73 percent yesterday.
January-delivery crude oil fell 59 cents, or 0.7 percent, to settle at $88.50 on the Nymex, the first drop in four days.
“Concern about the fiscal cliff is impacting the market,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. President Barack Obama, a Democrat, yesterday rejected Republican House Speaker John Boehner’s counterproposal to avoid the $607 billion in tax increases and spending cuts set to take effect in January.
Boehner proposed $2.2 trillion in spending cuts and new revenue without raising taxes. Obama said in a Bloomberg Television interview today that the stalemate will continue as long as Republicans refuse to raise tax rates on the top 2 percent of earners.
The most active options in electronic trading today were January $85 puts, which advanced 9 cents to 54 cents a barrel on volume of 2,221 lots at 3:49 p.m. January $80 puts were the second-most active, with 1,447 lots exchanged as they were unchanged at 9 cents a barrel.
Bets that prices would decline, or puts, accounted for 58 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, bearish bets made up 61 percent of the 123,775 contracts traded.
February $110 calls were the most active options yesterday with 6,106 contracts. They were unchanged at 11 cents a barrel. January $85 puts fell 13 cents to 45 cents on 5,112 lots.
Open interest was highest for January $105 calls, with 45,699 contracts. Next were January $60 puts, at 34,922 lots, and January $110 calls, with 31,400.
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