Oil Options Volatility Sinks as Debt Talks Boost Futures

Crude oil options volatility fell as futures rose after President Barack Obama said he will meet with Congressional leaders next week for fiscal talks.

Implied volatility for at-the-money options expiring in January, a measure of expected price swings in futures and a gauge of options prices, was 28.99 percent on the New York Mercantile Exchange as of 4:10 p.m., down from 32.45 percent yesterday.

January-delivery crude oil rose 99 cents, or 1.2 percent, to settle at $86.55 a barrel on the Nymex.

Obama, speaking at the White House for the first time since his re-election, invited House and Senate leaders to begin talks to avoid the so-called fiscal cliff, $607 billion in automatic spending cuts and tax increases scheduled to take effect in January.

“There’s some hope they have to agree on something and the sentiment that the market was oversold,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

The most active options in electronic trading today were January $110 calls, which fell 1 cent to 8 cents a barrel on volume of 3,016 lots at 4:14 p.m. December $85 puts were the second-most active, with 2,786 lots exchanged as they declined 75 cents to 45 cents.

Bets that prices would rise, or calls, accounted for 50 percent of the 44,309 lots traded.

Exchange Data

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, calls made up 51 percent of the 152,042 contracts traded.

December $80 puts were the most actively traded options yesterday with 10,421 contracts. They fell 18 cents to 14 cents a barrel. December $85 puts declined 60 cents to $1.20 on volume of 8,265 lots.

Open interest was highest for December $120 calls with 68,068 contracts. Next were December $125 calls with 46,020 lots and December $115 calls with 42,045.

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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