Oil Options Volatility Falls as Futures Rise

Crude-oil options volatility slipped as underlying futures dropped 44 cents, the smallest decline since June 7.

Implied volatility for at-the-money options expiring in August, a measure of expected price swings in futures and a gauge of options prices, was 34.6 percent at 3:12 p.m. on the New York Mercantile Exchange, up from 34.8 percent on July 3.

“There wasn’t much movement today,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “It was mostly a squaring-off in August.”

Crude oil for August delivery settled at $87.22 a barrel on the Nymex.

Futures fell as the dollar rose versus the euro when European Central Bank President Mario Draghi said the 17-country currency bloc continues to face economic risk after policy makers cut interest rates to a record low. A stronger dollar reduces the investment appeal of commodities.

The most active options in electronic trading today were August $80 puts, which were unchanged at 31 cents a barrel at 4:19 p.m. with 3,976 lots trading. September $80 puts were the second-most active options, with 2,658 lots changing hands as they gained 21 cents to $1.64.

“August $80 and $85 puts traded toward the close and August $90 and $98 calls,” Rigolini said. “August $68 and $77 puts traded as a put spread and August $95 and $98 as a call spread.”

Puts More-Active

Puts accounted for four of the five most heavily traded options and 52 percent of total 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 69 percent of the 248,910 contracts traded in the previous session when futures surged on speculation central banks would ease monetary policy and Iran oil sanctions would reduce stockpiles.

August $95 calls were the most actively traded, with 25,623 lots changing hands. They rose 30 cents to 42 cents. The next- most active options, August $98 calls, advanced 15 cents to 23 cents on volume of 22,030.

Open interest was highest for December $80 puts with 44,372 contracts. Next were December $120 calls with 39,857 lots and December $70 puts with 35,715.

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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