Crude oil options volatility rose as underlying futures surged as much as 2.8 percent after Reuters reported that Iranian oil exports would drop 300,000 barrels a day this month.
Implied volatility for at-the-money options expiring in May, a measure of expected price swings in futures and a gauge of options prices, was 25.28 percent as of 2:30 p.m. on the New York Mercantile Exchange, up from 25.05 percent in the previous session.
“The feeling I get is that the market is really nervous,” said Amrita Sen, a London-based analyst at Barclays Capital. “It’s nervous on the crude side because of lack of capacity.”
Crude for May delivery rose $2.90 to touch $108.25 a barrel at 9:55 a.m., before paring gains. The contract settled $1.52, or 1.4 percent, higher at $106.87 on Nymex. Futures have gained 8.1 percent this year on concern that tensions with Iran over its nuclear program would reduce global crude supplies.
“The Iran equation is back in and people are concerned,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.
Even with today’s spike, crude remained in the trading range between $103.78 to $110.55 that it has occupied since Feb. 21. Because of the narrow swings, volatility has declined from 30.8 on March 6.
The most-active options in electronic trading today were June $130 calls, which gained 14 cents to 42 cents a barrel at 2:52 p.m. with 1,968 contracts trading. May $90 puts were the second-most active options with 1,755 lots changing hands. They fell 4 cents to 8 cents a barrel.
Calls accounted for 60 percent of electronic trading volume. One contract covers 1,000 barrels of crude.
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.
Bearish options accounted for 54 percent of the 139,894 trades yesterday. May $120 calls were the most actively traded, with 6,625 lots changing hands as they fell 7 cents to 15 cents a barrel. The next-most active options, May $100 puts, increased 27 cents to $1.01 on volume of 5,320.
Open interest was highest for December $80 puts with 46,141 contracts. Next were December $150 calls with 38,605 lots and December $100 calls with 34,926.
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