Oil Options Volatility Slides as Crude Gains on Refinery Returns

Oil options volatility slid as crude futures rose after some U.S. East Coast refineries returned to full operations following Hurricane Sandy.

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 30.13 percent on the New York Mercantile Exchange at 4:05 p.m. compared with 30.54 percent yesterday.

Crude oil for December delivery rose 56 cents to settle at $86.24 a barrel as Monroe Energy and PBF Energy Inc. (PBF) returned refineries in Pennsylvania, New Jersey and Delaware to full rates.

The most-active options in electronic trading today were December $85 puts, which fell 35 cents to $1.46 a barrel on volume of 4,760. The second-most active were December $90 puts, which fell 54 cents to $4.34 a barrel with 3,976 contracts trading. One contract covers 1,000 barrels of oil.

Puts, or bets that prices will fall, accounted for 65 percent of the 37,386 contracts that traded.

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, puts made up 61 percent of the 18,363 contracts that changed hands.

December $80 puts were the most actively traded in the previous session, falling 3 cents to 50 cents a barrel on volume of 2,252 lots. December $81 puts were next, with 1,214 lots changing hands as they fell 4 cents to 66 cents a barrel.

Open interest was highest for December $120 calls, with 68,123 lots. Next were December $125 calls, with 45,994, followed by December $80 puts with 45,621.

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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