Crude Options Volatility Declines a Sixth Day as Futures Fall

Crude oil options volatility fell for a sixth consecutive session as underlying futures remained within a three-week trading range.

Implied volatility for at-the-money options expiring in May, a measure of expected price swings in futures and a gauge of options prices, sank to 26.5 percent as of 3 p.m. in New York, down from 26.7 percent yesterday.

“The market has been in a tight range since coming off its highs after the run-up with the Iran fears,” said Vince Lanci, managing partner of Echobay Partners LLC, a commodity investment firm in Stamford, Connecticut.

Crude for April delivery fell $1.28, or 1.2 percent, to settle at $105.43 a barrel on the New York Mercantile Exchange. The May contract declined $1.29 to $105.95. Since Feb. 21, the front-month contract has traded in a range of $104.26 to $110.55.

Futures have risen 6.7 percent this year on concern that Iran’s development of a nuclear program would result in supply disruptions.

“The market doesn’t have directional momentum now and you can see that by the options trade,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

The most-active options in electronic trading today were June $70 puts, with 6,311 lots changing hands as of 3:11 p.m. They fell 1 cent to 4 cents a barrel. April $108 calls, the second-most active options, declined 34 cents to 6 cents with 4,272 lots trading. One contract covers 1,000 barrels of crude.

Puts accounted for 58 percent of electronic trading volume.

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.

Previous Session |

Bearish options accounted for 51 percent of the 115,426 trades from the previous session. April $100 calls were the most actively traded, with 5,056 lots changing hands as they fell 2 cents to 12 cents a barrel. The next-most active options, June $100 puts, declined 19 cents to $2.30 on volume of 3,899.

Open interest was highest for December $80 puts with 46,201 contracts. Next were December $150 calls with 38,632 lots and December $100 calls with 34,926.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

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

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