Bloomberg News

Oil Options Volatility Rises as Oil Slips on Draghi Comments

December 06, 2012

Crude options volatility rose after oil fell when European Central Bank President Mario Draghi said the region’s slump will linger until the second half of 2013.

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 28.71 percent on the New York Mercantile Exchange as of 2:15 p.m., up from 26.73 yesterday.

January-delivery crude oil slid $1.62, or 1.8 percent, to $86.26 a barrel at 2:19 p.m. on the Nymex.

The ECB cut its growth and inflation forecasts and Draghi left the door open for further interest rate reductions, saying that ECB policy makers considered a rate cut today.

The most active options in electronic trading today were February $100 calls, which slipped 5 cents to 27 cents a barrel on volume of 6,576 lots at 2:20 p.m. January $85 puts were the second-most active, with 3,737 lots exchanged as they gained 40 cents to 97 cents.

Bets that prices would rise, or calls, accounted for 57 percent of electronic 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 51 percent of the 100,191 contracts traded.

February $105 calls were the most active options yesterday with 6,068 contracts changing hands. They fell 3 cents to 14 cents a barrel. January $85 puts rose 4 cents to 57 cents on 4,533 lots.

Open interest was highest for January $105 calls, with 45,796 contracts. Next were January $60 puts, at 34,922 lots, and January $110 calls, with 31,406.

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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