Oil Options Volatility Slips as Crude Futures Break Slide

Crude oil options volatility fell below 30 percent as the underlying futures rose for the first time in four days.

Implied volatility for options expiring in November, a measure of expected price swings in futures and a gauge of options prices, was 29.08 percent as of 3:49 p.m. in New York, down from 31.7 percent yesterday.

“When prices go up, volatility goes down, typical of the options market,” said Jim Colburn, a vice president and energy options broker at Jefferies Bache LLC in New York.

Crude oil for November delivery rose $1.87, or 2.1 percent, to $91.85 on the New York Mercantile Exchange, after settling below $90 yesterday for the first time since Aug. 2. Today’s increase is the largest in eight weeks. Prices are down 4.8 percent this month.

The most active options in electronic trading today were November $75 puts, bets that prices would decline, which fell 6 cents to 4 cents a barrel at 3:54 p.m. with 1,437 lots trading. November $105 calls were the second-most active, with 1,166 lots changing hands as they rose 1 cent to 14 cents a barrel.

“November puts have been active, $78, $84, $85, $87 puts,” Colburn said. “There was a lot of open interest in puts.”

Puts accounted for 57 percent of the 37,328 contracts in electronic trading. One contract covers 1,000 barrels of crude oil.

The exchange distributes real-time data for electronic trading and releases information the next business day on open- outcry volume, where the bulk of options activity occurs.

In the previous session, bearish bets made up 57 percent of the 205,947 contracts traded.

November $80 puts were the most actively traded options with 12,381 lots changing hands. They rose 9 cents to 31 cents a barrel. November $75 puts advanced 3 cents to 10 cents on volume of 8,580.

Open interest was highest for December $120 calls with 44,944 contracts. Next were December $100 calls with 43,103 lots and December $80 puts with 42,938.

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