Oil Options Volatility Little Changed as Futures Retreat

Oil options volatility was little changed as the underlying futures fell after reports indicating manufacturing is weakening in China and Europe, raising concerns that fuel demand will decline.

Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 24.21 at 3:35 p.m. on the New York Mercantile Exchange, compared with 24.47 on April 20. It was the third straight decline.

“Volatility was up pretty good for a while, but oil held above $102 and there was not a lot of option activity to really affect anything,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Crude oil for June delivery fell 77 cents to settle at $103.11 a barrel on the New York Mercantile Exchange after touching $101.82. Crude has traded in a range of $100.68 to $105.07 since April 4. Futures have declined 6.1 percent since reaching a high of $109.77 on Feb. 24.

The most-active oil options in electronic trading today were June $100 puts, which gained 3 cents to $1.41 a barrel at 3:44 p.m. with 2,729 contracts trading. June $95 puts were the second-most active with 2,176 lots changing hands. They fell 2 cents to 49 cents.

Puts accounted for 58 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 bets accounted for 53 percent of the 91,466 trades in the previous session. December $70 puts were the most actively traded, with 8,016 lots changing hands. They were down 12 cents to 69 cents a barrel. The next-most active options, August $130 calls, fell 3 cents to 26 cents on volume of 3,263.

Open interest was highest for December $80 puts with 43,436 contracts. Next were December $150 calls with 38,301 lots and June $140 calls with 35,101.

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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