Oil Volatility Falls as Futures Decline on French Outlook Cut

Oil options volatility dropped as the underlying futures tumbled to a six-week low after Fitch Ratings lowered France’s rating outlook and put nations including Spain and Italy on review for a downgrade.

Implied volatility for at-the-money options expiring in February, a measure of expected swings in futures and a gauge of options prices, fell to 36.8 at 2 p.m. in New York from 38 yesterday. Oil dropped as much as 1.4 percent as Fitch cited Europe’s failure to find a “comprehensive solution” to the debt crisis as a reason for the review.

The most active options contracts in electronic trading today were February $110 calls, with 1,920 lots changing hands as of 1:57 p.m. in New York. The options fell 14 cents to 44 cents a barrel. February $90 puts traded 1,396 lots, dropping 3 cents to $2.58. One contract covers 1,000 barrels of crude.

Oil for January delivery dropped 30 cents, or 0.3 percent, to $93.57 a barrel at 1:54 p.m. on the New York Mercantile Exchange. The contract touched $92.52, the lowest intraday level since Nov. 3.

February $140 calls were the most active options traded in the previous session, with 3,952 lots changing hands. They rose 1 cent to 12 cents a barrel. The next most active options, February $115 calls, declined 3 cents to 40 cents on volume of 2,699 contracts.

Open interest was highest for December 2012 $150 calls with 37,825 contracts. Next were December 2012 $80 puts with 37,059 contracts and December 2012 $100 calls with 33,093.

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

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.