Crude Options Volatility Declines as Oil Gains on Israeli Strike

Crude oil options volatility fell as underlying futures rose after Israel killed a Hamas militant leader in an air strike today.

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 29.96 percent on the New York Mercantile Exchange as of 2:35 p.m., down from 30.5 percent yesterday.

“You’re seeing a little slippage in volatility because of the higher price,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

January-delivery crude oil rose 91 cents, or 1.1 percent, to settle at $86.75 a barrel on the Nymex.

Prices rose after Israeli jets struck the Gaza Strip today, killing the leader of Hamas’s military wing, as the army pledged the use of ground troops if required to end attacks on Israel’s citizens.

The most active options in electronic trading today were January $105 calls, which rose 6 cents to 19 cents a barrel on volume of 13,955 lots at 2:40 p.m. January $115 calls were the second-most active, with 3,531 lots exchanged as they increased 3 cents to 9 cents a barrel.

Bets that prices would rise, or calls, accounted for 74 percent of the 59,966 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, bearish bets made up 59 percent of the 94,886 contracts traded.

March $65 puts were the most actively traded options yesterday with 5,689 contracts. They rose 6 cents to 43 cents a barrel. January $70 puts advanced 3 cents to 13 cents on volume of 4,583 lots.

Open interest was highest for January $110 calls, with 36,913 contracts. Next were January $60 puts, with 34,879 lots, and January $72 puts with 25,935.

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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