Breaking News

Tweet TWEET

Oil Volatility Weakens as Futures Drop From 26-Month High

Oil options volatility weakened as the underlying crude futures dropped from a 26-month high on increased investor sales after the contract failed to hold above a $90 resistance level.

Implied volatility for at-the-money options expiring in February, a measure of expected price swings in futures and a gauge of options prices, was 31.1 percent as of 4 p.m. in New York, down from 31.8 percent yesterday.

Crude oil for January delivery declined 69 cents to settle at $88.69 a barrel on the New York Mercantile Exchange.

Crude oil slipped 0.8 percent after touching $90.76 a barrel earlier today when President Barack Obama said that he’ll agree to a two-year extension on all tax cuts introduced by President George W. Bush in a compromise he called “an essential step on the road to recovery.”

March $70 puts were the most active options in electronic trading today with 6,828 lots changing hands as of 4:19 p.m. They were unchanged at 36 cents a barrel. January $85 puts, the next-most active contract, rose 16 cents to 59 cents a barrel with 2,571 contracts trading.

The exchange distributes real-time data for electronic trading and releases information on floor trading, where the bulk of options trading occurs, the next business day.

February $80 puts were the most active options traded yesterday with 8,926 lots changing hands. They fell 6 cents to 81 cents. June $120 calls, the next-most active option, dropped 3 cents to 73 cents with 5,900 contracts traded.

Open interest was highest yesterday for December 2011 $100 calls with 45,812 contracts. Next were December 2011 $120 calls with 32,400 and February $100 calls at 28,917 lots.

To contact the reporter on this story: Samantha Zee in San Francisco at szee@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.