Oil Options Volatility Rises as S&P May Downgrade Germany

Oil options volatility rose as the underlying futures were little changed after Standard & Poor’s planned to say it may strip Germany and France of their AAA credit ratings.

Implied volatility for at-the-money options expiring in January, a measure of expected swings in futures and a gauge of options prices, rose to 34 at 4:15 p.m. in New York, from 33.3 on Dec. 2.

Oil erased earlier gains after reports that S&P may strip France and Germany of their AAA ratings and put all 17 euro nations on review for possible downgrade.

The most active options contracts in electronic trading today were January $95 puts, with 1,494 lots changing hands at 4:18 p.m. The options fell 18 cents to 49 cents a barrel. Next were February $90 puts, with 1,343 lots. They fell 21 cents to $1.46. One contract covers 1,000 barrels of crude.

Puts accounted for 45 percent of the volume.

Oil for January delivery rose 3 cents to settle at $100.99 a barrel on the New York Mercantile Exchange. Prices moved between $100.24 and $102.44. Oil is up 10 percent this year.

June $120 calls were the most active options traded in the previous session, with 7,700 lots changing hands. They increased 11 cents to $3.47. The next-most active options, June $85 puts, declined 21 cents to $4.84 on volume of 6,100.

Calls accounted for 55 percent of 104,522 lots traded.

Open interest was highest for December 2012 $150 calls with 38,023 contracts. Next were December 2012 $80 puts with 35,453 contracts, and December 2012 $100 calls with 32,375.

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.

-- Editors: Richard Stubbe, Bill Banker

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

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

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