Oil Options Volatility Rises as Futures Fall on Elections

Oil options volatility jumped to the highest level in three weeks as underlying futures fell on concern that the outcome of elections in France and Greece will slow that region’s recovery.

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 27.7 percent at 3:24 p.m. on the New York Mercantile Exchange, up from 26.9 on May 4. Volatility was at a 12-month low of 20.7 percent on April 27.

“There’s fears about Europe, that all the problems they had agreements to resolve are gone after the elections,” said Phil Flynn, vice president of research at PFGBest in Chicago.

Futures fell as Francois Hollande was elected president of France, promising to push for less austerity and more growth. In Greece, voters flocked to anti-bailout parties.

Crude oil for June delivery declined 55 cents to settle at $97.94 a barrel on the Nymex, the lowest settlement since Feb. 6. Prices have slipped 11 percent since Feb. 24, when they reached the 20012 high of $109.77.

The most-active oil options in electronic trading today were June $95 puts, which fell 5 cents to 79 cents at 4:05 p.m. with 8,512 lots trading. June $90 puts were the second-most active with 7,006 lots changing hands. They declined 9 cents to 15 cents.

Puts Trading

Puts accounted for 59 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 308,986 trades in the previous session. June $95 puts were the most actively traded, with 21,002 lots changing hands. They were up 54 cents to 84 cents a barrel. The next-most active options, June $90 puts, advanced 16 cents to 24 cents on volume of 20,769.

Open interest was highest for December $80 puts with 43,555 contracts. Next were December $70 puts with 36,586 lots and December $150 calls with 36,462.

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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