Oil options volatility fell as crude climbed, heading for the biggest weekly gain this year, on signs of an improving U.S. economy and progress on a Greek bailout that bolstered the outlook for fuel demand.
Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 28.3 as of 1 p.m. in New York, down from 29.9 yesterday.
Crude for March delivery gained $1.12 to $103.43 a barrel on the New York Mercantile Exchange. Prices have ranged between $92.52 and $103.74 since Dec. 16.
“As the price rises, the volatility is going to come off,” Fred Rigolini, vice president of Paramount Options Inc. in New York, said by telephone. “We’re starting to break out of the range we’ve been in for the last month or so.”
Volatility for 25-delta calls, which gain 25 cents for each dollar rise in futures prices, was 30.6, little changed from 30.7 a week ago, while 25-delta puts were 27.9, down from 30.2.
The most active options in electronic trading today were April $150 calls. They slipped 1 cent to 10 cents a barrel with 1,642 contracts trading as of 1:35 p.m. in New York. Next were April $100 puts, which dropped 52 cents to $1.62 a barrel on 1,580 lots. A contract covers 1,000 barrels of crude. Calls were 51 percent of the volume.
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.
Calls accounted for 54 percent of the volume yesterday. May $125 calls were the most actively traded options, with 6,927 lots changing hands. They rose 8 cents to 82 cents a barrel. The next-most active options, December 2013 $140 calls, fell 17 cents to $3.07 a barrel on volume of 5,000 lots.
Open interest was highest for December $80 puts with 42,336 contracts. Next were December $150 calls with 38,817 lots and December $100 calls with 34,548.
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