Bloomberg News

Crude Options Volatility Jumps to 12-Day High as Oil Sinks

June 20, 2013

Crude oil options volatility jumped to a 12-day high as underlying futures slid 3.4 percent on indications the Federal Reserve will reduce stimulus efforts later this year.

Implied volatility for at-the-money options expiring in August, a measure of expected price swings in futures and a gauge of options prices, was 22.47 percent on the New York Mercantile Exchange as of 2:47 p.m., compared with 18.58 percent yesterday.

“People are trying to protect a losing position,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “You had a lot of people on the long side going into this Fed meeting.”

West Texas Intermediate crude for August delivery fell $3.34 to settle at $95.14 a barrel on the Nymex.

Federal Reserve Chairman Bernanke told reporters yesterday that the Fed will probably pare its $85 billion in monthly bond purchasing later in 2013 and end its quantitative easing program altogether around mid-2014. Bernanke said curbs to bond buying hinge on gains in the labor market and a pickup in growth.

The most-active options in electronic trading today were August $90 puts, which gained 59 cents to 86 cents a barrel on volume of 14,158 lots traded at 2:50 p.m. September $85 puts were the second-most active, advancing 47 cents to 82 cents a barrel on volume of 10,110 contracts.

Puts accounted for 65 percent of electronic trading volume. In the prior session, bullish bets accounted for 52 percent of 113,676 contracts.

September $100 calls were the most-active options traded yesterday, with 5,661 contracts changing hands. They fell 10 cents to $2.34 a barrel. August $85 puts were unchanged at 9 cents on volume of 5,365 lots.

Open interest was highest for September $85 puts, with 54,882 contracts. Next were December $105 calls with 36,214 lots and December $80 puts with 35,514.

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 Houston at bpowell4@bloomberg.net

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


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