Bloomberg News

Crude Options Volatility Rises as Futures Sink to Five-Week Low

January 06, 2014

West Texas Intermediate crude options volatility rose, nearing the highest level since November, as futures fell to a five-week low amid rising supply.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, was 19.62 percent at 4:20 p.m. on the New York Mercantile Exchange, up from 18 percent on Jan. 3, according to data compiled by Bloomberg.

At-the-money volatility sank to 13.02 percent on Dec. 26, the lowest level since at least 2006, amid thin trading and speculation prices would remain range-bound through the Christmas and New Year’s holidays.

“While we believe oil-price risks are substantially skewed to the downside in 2014, further downside in volatility is likely limited,” analysts at Goldman Sachs Group Inc. (GS:US) including Jeffrey Currie said in a note today. “Should inventories begin to build in earnest in 2014, the relationship between volatility and inventories suggests that volatility should begin to rise as inventories build above the 5-year average.”

WTI for February delivery slid 53 cents, or 0.6 percent, to $93.43 a barrel on the New York Mercantile Exchange, the lowest settlement since Nov. 29. The five-day losing streak is the longest since September. The volume of all futures traded was 19 percent below the 100-day average at 2:57 p.m.

Puts accounted for almost 51 percent of electronic trading volume as of 4:52 p.m. The most-active options were February $98 calls, which slipped 5 cents to 7 cents on volume of 2,572 lots. Second-most-active were March $100 calls, down 6 cents to 42 cents on 2,125 contracts.

Previous Session

In the previous session, calls accounted for 53 percent of trading volume of 169,637. February $100 calls fell 9 cents to 5 cents on volume of 5,801 contracts. March $105 calls declined 6 cents to 11 cents on 5,477 lots.

Open interest was highest for June $80 puts, with 34,111 contracts. Next were June $85 puts with 26,541 lots and December 2015 $120 calls with 25,368.

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: Eliot Caroom in New York at ecaroom@bloomberg.net

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


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    • $185.03 USD
    • 1.72
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