Oil Options Volatility Falls as Futures Stay in Range

Oil options volatility declined to the lowest level in more than a year as the underlying futures rose while remaining within a three-week trading range.

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 21.7 percent at 3:50 p.m. on the New York Mercantile Exchange, compared with 23.1 percent yesterday. It was the sixth straight decline and lowest level since at least March 4, 2011.

Crude oil for June delivery rose 43 cents, or 0.4 percent, to settle at $104.55 a barrel on Nymex, a three-week high. Crude, which has gained 5.8 percent this year, has traded in a range of $100.68 to $105.07 since April 4.

Prices climbed today as pending home purchases rose and the dollar weakened, increasing the investment appeal of commodities.

The most-active oil options in electronic trading today were June $110 calls, which fell 4 cents to 45 cents a barrel at 3:46 p.m. with 2,620 contracts trading. June $90 puts were the second-most active with 2,053 lots changing hands. They lost 2 cents to 6 cents.

Puts accounted for 54 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 56 percent of the 127,789 trades in the previous session. June $100 puts were the most actively traded, with 5,831 lots changing hands. They were down 23 cents to 97 cents a barrel. The next-most active options, June $85 puts, fell 1 cent to 3 cents on volume of 5,216.

Open interest was highest for December $80 puts with 44,016 contracts. Next were December $150 calls with 38,060 lots and June $140 calls with 35,022.

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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