Oil Options Volatility Rises as Futures Gain Most in Two Weeks

Oil options volatility rose for the first time in three days as underlying futures gained the most in two weeks on concern that Middle East tensions will disrupt oil supplies.

Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options prices, was 34.2 percent at 3:45 p.m. on the New York Mercantile Exchange, up from 32.1 yesterday.

Crude oil for September delivery rose $2.80 to $92.66 a barrel on the Nymex, while the front-month August contract gained $2.79 to $92.66. Prices have climbed 10 percent in seven sessions, the longest streak of advances since Feb. 24.

Futures gained as Israeli Prime Minister Benjamin Netanyahu said Lebanon’s Iranian-backed Hezbollah organization carried out the attack that killed at least five Israeli tourists in Bulgaria. Iranian Foreign Ministry spokesman Ramin Mehmanparast accused Israel of “delusive” accusations.

The most active options in electronic trading today were September $105 calls, which rose 20 cents to 50 cents a barrel at 3:48 p.m. with 4,455 lots trading. September $100 calls were the second-most active options, with 3,738 lots changing hands as they advanced 49 cents to $1.11 a barrel.

Calls accounted for 55 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 58 percent of the 109,213 contracts traded in the previous session.

September $115 calls were the most actively traded yesterday, with 5,799 lots changing hands. They fell 1 cent to 12 cents a barrel. The next-most active options, December $120 calls were unchanged at 57 cents on volume of 4,881.

Open interest was highest for December $80 puts with 43,145 contracts. Next were December $120 calls with 39,719 lots and December $100 calls with 38,862.

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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