Crude Options Volatility Falls as Futures Rebound From 2012 Low

Crude-oil options volatility fell as the underlying futures rebounded after hitting a six-month low last week as the Seaway pipeline began carrying cheap oil to the Gulf of Mexico.

Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 27.6 percent at 12:50 p.m. on the New York Mercantile Exchange, down from 29.6 percent May 18.

Crude oil for June delivery rose 79 cents, or 0.9 percent, to $92.27 a barrel on the Nymex at 12:55 p.m.

Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) started shipping oil Saturday through the 150,000-barrel-a-day Seaway pipeline from Cushing, Oklahoma, to Houston-area refineries. The startup of the line, which was reversed, may ease a storage glut in Cushing, the delivery point for New York futures.

Booming production in Canada and the Midwest U.S. combined with a lack of pipeline capacity out of Cushing caused storage there to increase to 45.1 million barrels, the highest level on record, the Energy Department said May 16.

The most-active oil options in electronic trading today were July $80 puts, which fell 20 cents to 22 cents a barrel at 1:12 p.m. with 3,821 lots trading. July $130 calls were the second-most active options with 2,560 lots changing hands as they fell 1 cent to 3 cents a barrel.

Calls accounted for 63 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.

December $90 puts were the most active options in May 18 trading, rising 55 cents to $6.71 a barrel on 6,557 lots. July $120 calls were next, falling 1 cent to 7 cents on volume of 6,491.

Open interest was highest for December $80 puts with 39,794, followed by December $150 calls with 35,723 and December $70 puts with 35,211.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

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

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