Bloomberg News

Volatility of WTI Crude Options Slides as Price Range Narrows

December 20, 2013

Crude options volatility slid to the lowest level since at least 2006 on expectation that crude will trade in a tight range for the rest of the year.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, fell to 13.95 percent at 3:10 p.m. on the New York Mercantile Exchange, from 15.1 percent yesterday.

February futures advanced 28 cents to settle at $99.32 a barrel on the Nymex. Prices have settled between $96.04 and $99.32 since Dec. 3.

“It’s a tight range,” said Selo Kraja, an account executive at Price Futures Group in Chicago. “I don’t think anybody wants to take any large positions over the holidays. Everybody is waiting for the traders to come back after the new year and for the funds to get back in the market.”

Puts, or bets that prices would fall, accounted for 70 percent of electronic trading volume as of 2:54 p.m.

The most-active options were April $65 puts, which rose 1 cent to 3 cents with 2,925 lots trading. February $100 calls, the second-most active, slipped 11 cents to $1.06 on volume of 1,371 lots.

In yesterday’s session, puts accounted for 55 percent of the 107,426 lots traded. March $95 puts declined 35 cents to $1.21 on 3,986 contracts. February $88 puts fell 3 cents to 5 cents on volume of 3,719 lots.

Open interest was highest for June $80 puts, with 33,981 contracts. Next were June $85 puts with 26,470 lots and December 2015 $120 calls with 25,369.

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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