Oil Options Volatility Rises as Crude Slips on Fiscal Concern

Crude oil options volatility rose as underlying futures weakened on concern about the progress of budget talks in Congress and the outcome of meetings in Europe over bailout terms for Greece.

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 27.94 percent on the New York Mercantile Exchange as of 1:15 p.m., up from 27.14 percent on Nov. 23. January-delivery crude oil fell 46 cents to $87.82 a barrel on the Nymex.

President Barack Obama’s administration is negotiating with a divided Congress to avoid the so-called fiscal cliff, a $607 billion combination of automatic spending cuts and tax increases scheduled to take effect in January. European finance ministers were meeting today for a fourth round of talks in two weeks to try to reach consensus on an aid package for Greece.

The most active options in electronic trading today were January $80 puts, which were unchanged at 23 cents a barrel on volume of 2,717 lots at 1:21 p.m. January $95 calls were the second-most active, with 1,352 lots exchanged as they slid 14 cent to 30 cents a barrel.

Puts accounted for 59 percent of trading volume.

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 62 percent of the 35,528 contracts traded.

January $102 calls were the most actively traded options on Nov. 23 with 4,925 contracts. They rose 2 cents to 13 cents a barrel. January $100 calls increased 3 cents to 17 cents on volume of 2,836 lots.

Open interest was highest for January $105 calls, with 46,668 contracts. Next were January $60 puts, with 34,924 lots, and January $110 calls, with 31,151 contracts.

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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