Oil Options Volatility Falls as Futures Locked in Trading Range

Crude options volatility fell as the underlying oil futures remained within a two-week trading range of about $5.

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 27.18 percent on the New York Mercantile Exchange as of 3:20 p.m., down from 27.49 yesterday.

“There wasn’t really much of a move in volatility,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “Some people come in and just buy some straddles on whim because at some point, at least by the end of the year, we could break out of this range.”

January-delivery crude oil fell 62 cents, or 0.7 percent, to settle at $87.88 a barrel on the Nymex. Since Nov. 19, crude has traded in an intraday range between $85.36 and $90.33.

The most active options in electronic trading today were January $85 puts, which rose 4 cents to 57 cents a barrel on volume of 3,761 lots at 3:28 p.m. February $79 puts were the second-most active, with 3,031 lots exchanged as they advanced 8 cents to 64 cents.

Bets that prices would decline, or puts, accounted for 52 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, bullish bets made up 52 percent of the 91,909 contracts traded.

January $85 puts were the most active options yesterday with 3,921 contracts. They rose 8 cents to 53 cents a barrel. December 2015 $150 calls fell 1 cent to $1.48 on 2,850 lots.

Open interest was highest for January $105 calls, with 45,783 contracts. Next were January $60 puts, at 34,922 lots, and January $110 calls, with 31,399.

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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