Bloomberg News

Crude Options Volatility Slips as Futures Highs and Lows Move Up

July 11, 2013

Crude options volatility declined after underlying futures retreated even as prices touched higher highs and higher lows than yesterday.

Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options, was 22.51 percent on the New York Mercantile Exchange as of 3:37 p.m., down from 23.86 percent yesterday.

Volatility jumped almost 2 percentage points yesterday when crude for September delivery rose 2.9 percent after the Energy Information Administration reported that supplies fell 9.87 million barrels last week to 373.9 million.

West Texas Intermediate crude for September delivery fell $1.24, or 1.2 percent, to settle at $104.38 a barrel on the Nymex. The intraday high was $106.53 and the low was $103.73, compared with yesterday’s range of $105.77 and $103.67. August futures slipped $1.61, or 1.5 percent, to $104.91.

“After adjusting positions yesterday, because there are higher highs and higher lows today, people haven’t really jumped out of their positions,” said Phil Flynn, vice president of research at PFGBest in Chicago.

The most-active options in electronic trading today were August $100 puts, which rose 4 cents to 18 cents a barrel on volume of 4,428 lots traded at 3:03 p.m. August $104 puts were the second-most active, rising 31 cents to 97 cents a barrel on volume of 3,671 contracts.

More Puts

Puts accounted for 59 percent of electronic trading volume. In the prior session, calls made up 59 percent of 301,940 contracts exchanged.

August $112 calls were the most-active options yesterday, with 17,230 contracts changing hands as they gained 26 cents to 34 cents a barrel. August $110 calls gained 44 cents to 59 cents on 14,286 lots.

Open interest was highest for December $80 puts, with 37,538 contracts. Next were December $100 calls with 36,839 lots and September $90 puts with 36,403.

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 reporters on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

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


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