Oil Volatility Declines as Futures Climb Along With Equities

Oil options volatility fell as the underlying futures increased for the first time in three days on a rally by equities and a U.S. retail sales decline that was less than expected.

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 29.3 percent as of 5 p.m. in New York, down from 31.7 percent yesterday.

Crude for July delivery gained $2.07, or 2.1 percent, to settle at $99.37 a barrel on the New York Mercantile Exchange in the biggest one-day increase since May 18. Prices have climbed 32 percent in the past year. August futures gained $2.02, or 2.1 percent, to $99.86 a barrel.

The most active contracts in electronic trading today were July $95 puts, with 3,460 lots changing hands. They dropped 43 cents to 15 cents a barrel. July $98 puts, the next-most active option, tumbled $1.18 to 53 cents a barrel with 3,172 lots trading. One contract covers 1,000 barrels of crude.

July options expire on June 16.

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

July $96 puts were the most active options traded in the previous session, with 9,979 lots changing hands. They gained 33 cents to 84 cents a barrel. The next-most active options, July $100 calls, dropped 75 cents to 39 cents a barrel on volume of 9,421 lots.

Open interest was highest for December 2012 $80 puts with 46,227 contracts. Next were December 2011 $120 calls with 41,011 and December 2011 $150 calls with 38,362.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

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

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