Oil Volatility Falls as Futures Climb Most in Almost Four Weeks

Oil options volatility fell as underlying futures rose the most in almost four weeks on speculation there may be a supply disruption.

Implied volatility for at-the-money options expiring in January, a measure of expected swings in futures and a gauge of options prices, declined to 35.1 at 2 p.m. in New York from 36.8 yesterday. Futures rose on a report that Iran will hold drills to close the Strait of Hormuz, a bottleneck for oil exports from the Persian Gulf.

The most active options contracts in electronic trading today were February $85 puts, with 3,040 lots changing hands as of 2:12 p.m. in New York. The options fell 34 cents to 61 cents a barrel. January $95 puts traded 2,508 lots, dropping 37 cents to 11 cents. One contract covers 1,000 barrels of crude.

Oil for January delivery was up $2.39, or 2.4 percent, to $100.16 a barrel at 1:56 p.m. on the New York Mercantile Exchange, heading for the biggest gain since Nov. 16.

February $130 calls were the most active options traded in the previous session, with 6,185 lots changing hands. They dropped 3 cents to 21 cents a barrel. The next-most active options, February $135 calls, declined 2 cents to 17 cents on volume of 5,808 contracts.

Open interest was highest for December 2012 $150 calls with 38,023 contracts. Next were December 2012 $80 puts with 35,704 contracts and December 2012 $100 calls with 32,766.

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

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

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

Bloomberg reserves the right to edit or 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.