Oil Options Volatility Slips as Crude Falls on Fiscal Concern

Crude oil options volatility fell as underlying futures slipped on concern that budget talks in Congress won’t progress.

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 27.27 percent on the New York Mercantile Exchange as of 3:23 p.m., down from 27.93 percent yesterday.

January-delivery crude oil fell 69 cents, or 0.8 percent, to $86.49 a barrel on the Nymex, the third consecutive decline.

President Barack Obama’s administration is negotiating with a divided Congress to forestall a $607 billion combination of automatic spending cuts and tax increases set to begin Jan. 1. The Congressional Budget Office has said that failure to reach an agreement may push the economy into a recession next year.

The most active options in electronic trading today were January $80 puts, which rose 3 cents to 28 cents a barrel on volume of 4,585 lots at 3:34 p.m. February $75 puts were the second-most active, with 1,278 lots exchanged as they increased 4 cents to 39 cents a barrel.

Puts accounted for 53 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 64 percent of the 88,619 contracts traded.

February $105 calls were the most actively traded options yesterday with 4,192 contracts. They fell 8 cents to 20 cents a barrel. January $80 puts increased 2 cents to 25 cents on volume of 4,092 lots.

Open interest was highest for January $105 calls, with 46,454 contracts. Next were January $60 puts, unchanged at 34,924 lots, and January $110 calls, unchanged with 31,247 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

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.