Crude Oil Options Slip as Futures Decline to Three-Month Low

Crude oil options volatility slipped as underlying futures tumbled a fourth day to the lowest level since July.

Implied volatility for at-the-money options expiring in December, a measure of expected price swings in futures and a gauge of options prices, was 31.76 percent on the New York Mercantile Exchange at 3:30 p.m., down from 32.67 percent yesterday.

Puts were more active than calls, accounting for 53 percent of volume in electronic trading. The market maintained a put skew, with implied volatility on puts that protect against a 10 percent decline in December futures at 36.54 percent, compared with 30.07 percent for calls protecting against a 10 percent rise, according to data compiled by Bloomberg at 3:20 p.m.

“We’re breaking down out of a range to the lowest level since early summer and there were a lot of puts trading,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Rigolini said he saw trading in $72 and $75 puts for December and January and December $80 puts.

December-delivery crude oil fell $1.98, or 2.2 percent, to $86.67 a barrel, the lowest settlement since July 12.

Most-Active

The most active options in electronic trading today were December $80 puts, which rose 13 cents to 64 cents a barrel with 3,906 lots trading. December $100 calls were the second-most active, with 3,506 lots exchanged as they fell 8 cents to 8 cents a barrel.

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 51 percent of the 131,346 contracts traded.

December $80 puts were the most actively traded options yesterday with 8,354 contracts. They advanced 19 cents to 51 cents a barrel. January $75 puts rose 15 cents to 63 cents on volume of 5,564 lots.

Open interest was highest for December $120 calls with 67,851 contracts. Next were December $80 puts with 49,174 lots and December $125 calls with 45,768.

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