Crude Options Volatility Falls as Oil Gains for Third Day

Crude-oil options volatility rose as underlying futures fell for the first time this week after Federal Reserve Chairman Ben S. Bernanke gave no indication to lawmakers today that the Fed would soon act to boost growth.

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 34.7 percent at 4:15 p.m. on the New York Mercantile Exchange, up from 33.79 yesterday. Volatility reached 40.56 on June 1, the highest level since Oct. 20.

Crude oil for July delivery declined 20 cents to settle at $84.82 a barrel on the Nymex.

Bernanke told the congressional Joint Economic Committee that further rounds of stimulus could boost the economy, yet may have “diminishing returns.” He also said the economy is at risk from the Europe debt crisis and the prospect of fiscal tightening.

The most active oil options in electronic trading today were July $90 calls, which fell 10 cents to 12 cents a barrel with 2,263 lots trading. July $80 puts were the second-most active options with 1,974 lots changing hands as they rose 10 cents to 55 cents.

Calls accounted for 52 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.

Bullish bets accounted for 52 percent of the 185,185 trades in the previous session. July $93 calls were the most actively traded, with 11,966 lots changing hands. They were unchanged at 6 cents a barrel. The next-most active options, July $92 calls, rose 1 cent to 9 cents on volume of 6,471.

Open interest was highest for December $80 puts with 52,065 contracts. Next were December $70 puts with 37,665 lots and December $150 calls with 36,023.

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

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