Oil Options Volatility Slips as Crude Rises on German Confidence

Crude options volatility slid as oil rose after German investor confidence jumped to a seven-month high in December and OPEC members gathered in Vienna to discuss production levels.

Implied volatility for at-the-money options expiring in February, a measure of expected price swings in futures and a gauge of options prices, was 27.37 percent on the New York Mercantile Exchange as of 3:40 p.m. local time, down from 27.87 percent yesterday.

Crude for January delivery advanced 0.3 percent to $85.79 a barrel on the Nymex after five days of declines.

An index by the ZEW Center for European Economic Research of investor confidence in Germany rose more than expected on speculation the economy will gather momentum next year. The Organization of Petroleum Exporting Countries will probably leave its production quota unchanged when oil ministers meet tomorrow, a Bloomberg survey showed.

The most active options in electronic trading today were February $105 calls, which fell 1 cent to 10 cents a barrel on volume of 2,178 lots. January $85 puts were next, with 1,876 contracts exchanging hands as they fell 29 cents to 54 cents.

Trading was almost evenly split between puts and calls.

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 56 percent of the 113,076 contracts exchanged.

February $110 calls were the most active options yesterday, with 7,817 lots traded. They fell 1 cent to 7 cents a barrel. February $105 calls were next, dropping 1 cent to 11 cents a barrel on volume of 5,877.

Open interest was highest for January $105 calls, with 45,794 contracts. Next were January $60 puts at 34,922 lots and January $110 calls at 31,399 lots.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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