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Oil Options Volatility Drops as Crude Rises to Nine-Month High

Oil options volatility declined after crude rose to the highest level in more than nine months.

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 30.2 as of 2 p.m. in New York, down from 30.7 yesterday.

Crude oil for April delivery increased $1.58, or 1.5 percent, to $107.86 a barrel at 2:26 p.m. on the New York Mercantile Exchange after touching $107.94, the highest intraday price since May 5.

“You’re seeing us break out of the range, but we’re doing it at a slower pace here,” Fred Rigolini, vice president of Paramount Options Inc. in New York, said by telephone. “As we get to higher prices, $1 to $2 swings aren’t as volatile as when we were at lower prices so you’re actually going to see the volatility come in a little bit.”

The most active options in electronic trading today were April $100 puts. They fell 26 cents to 74 cents a barrel with 2,074 contracts trading as of 1:58 p.m. in New York. Next were April $110 calls, which rose 45 cents to $2.09 a barrel on 1,968 lots. A contract covers 1,000 barrels of crude. Puts were 52 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 53 percent of the volume yesterday. April $119 calls were the most actively traded options, with 9,684 lots changing hands. They fell 13 cents to 48 cents a barrel. The next-most active options, April $110 calls, fell 11 cents to $1.64 a barrel on volume of 6,248 lots.

Open interest was highest for December $80 puts with 45,154 contracts. Next were December $150 calls with 37,455 lots and December $100 calls with 34,554.

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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