Bloomberg News

Crude Options Volatility Rises as Futures Fall on Output

February 13, 2013

Crude oil options volatility rose for the first time in a week, gaining from the lowest level since 1995 as the underlying futures fell.

Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 17.48 percent on the New York Mercantile Exchange as of 3:35 p.m., up from 17.45 percent yesterday.

West Texas Intermediate oil for April delivery dropped 47 cents, or 0.5 percent, to $97.60 a barrel on the Nymex. March futures sank 50 cents to $97.01.

WTI slipped after Iran said it was nearing agreement with nuclear inspectors and as the Energy Information Administration said U.S. oil output rose to the highest level in 20 years.

The U.S. pumped 7.06 million barrels a day last week, the most since December 1992. Crude stockpiles climbed 560,000 barrels to 372.2 million, according to the Energy Department’s statistical arm.

The most active options in electronic trading today were March $96 puts, which fell 9 cents to 12 cents a barrel on volume of 3,737 contracts. The second-most active were March $95 puts. They declined 6 cents to 6 cents a barrel with 2,364 lots exchanged.

Bets that prices would fall, or puts, accounted for 61 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, puts accounted for 50.1 percent of volume.

March $98 calls were the most active options yesterday, increasing 2 cents to 38 cents a barrel with 5,220 contracts trading. March $99 calls rose 3 cents to 15 cents a barrel on 5,209 lots.

Open interest was highest for March $85 puts with 42,491 contracts. Next were March $110 calls at 40,868 and April $110 calls at 32,671.

To contact the reporter on this story: Kenneth Christensen in New York at kchristense9@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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