Bloomberg News

Crude Volatility Slides to Three-Week Low as Oil Futures Jump

March 07, 2013

Crude options volatility slid to the lowest level since Feb. 13 as underlying futures rose the most since Feb. 11.

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 17.52 percent at 4 p.m. on the New York Mercantile Exchange, down from 19.81 yesterday.

“People aren’t as worried about a disruption in supply for oil because supplies are rising, and there’s expectation demand isn’t going to be so strong in the short term because we’re in the shoulder season between winter and summer,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

West Texas Intermediate crude for April delivery rose $1.13, or 1.3 percent, to settle at $91.56 a barrel on the Nymex. Prices have declined 7.7 percent from a year-to-date high of $97.94 on Jan. 30.

U.S. crude supplies climbed 3.83 million barrels to 381.4 million last week, the highest level since June, according to data from the Energy Information Administration. Refinery utilization dropped to 82.2 percent of capacity, the least since March 16, 2012.

The most-active options in electronic trading today were April $92 calls, which rose 20 cents to 69 cents a barrel on volume of 1,658 contracts. April $86 puts were the second-most active with 1,640 lots. They slipped 10 cents to 4 cents.

Calls accounted for 50 percent of electronic trading volume. In the previous session, calls made up 58 percent of the 134,242 contracts traded.

June $90 puts were the most active options traded yesterday, with 6,112 contracts changing hands. They rose 9 cents to $2.96 a barrel. July $100 calls declined 15 cents to $1.12 on 5,579 lots.

Open interest was highest for December $105 calls with 36,319 contracts. Next were April $110 calls at 34,192 and June $120 calls at 30,053.

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.

To contact the reporter on this story: Barbara 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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