Crude Options Volatility Increases as WTI-Brent Spread Widens

Oil options volatility rose as underlying futures declined and the spread between U.S. and global crudes grew to the widest point in almost a year.

Implied volatility for options expiring in November, a measure of expected price swings in futures and a gauge of options prices, was 30.83 percent at 3:40 p.m. New York time, up from 28.14 percent on Oct. 5.

Crude for November delivery dropped 55 cents to settle at $89.33 a barrel on the New York Mercantile Exchange. Brent oil for November settlement slid 20 cents to $111.82 a barrel on the London-based ICE Futures Europe exchange.

The discount of Nymex West Texas Intermediate oil to Brent widened to $22.49 a barrel, the most since Oct. 20, 2011, on signs that supply in the U.S. is exceeding demand.

The most-active options in electronic trading today were January $120 calls with 2,439 lots changing hands. They rose 2 cents to 24 cents a barrel. November $84 puts were second-most active options, with 1,185 contracts traded. They fell 3 cents to 26 cents a barrel. One contract covers 1,000 barrels of oil.

Bullish bets accounted for 58 percent of the 23,991 contracts in electronic trading as of 4:38 p.m.

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, bullish bets accounted for 58 percent of the 104,594 contracts exchanged.

December $120 calls were the most-active options, with 4,356 lots trading hands while falling 2 cents to 11 cents a barrel. November $95 calls were the second-most active, dropping 48 cents to 31 cents a barrel as 4,095 lots changed hands.

Open interest was highest for December $120 calls, with 54,577 contracts. Next were December $80 puts with 48,549 contracts.

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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