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Oil Options Volatility Falls as Oil Climbs on Fed Stimulus

Crude options volatility fell as futures rose after the Federal Reserve boosted stimulus measures and the International Energy Agency forecast higher demand.

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 26.39 percent on the New York Mercantile Exchange as of 2:35 p.m., down from 27.5 percent yesterday.

February-delivery crude oil advanced 99 cents to settle at $87.31 a barrel on the Nymex.

Futures rose as the Fed said it will buy $45 billion a month of Treasury securities starting in January, and the IEA increased its world oil-demand forecast for this quarter and next year.

The most active options in electronic trading today were January $85 puts, which slipped 38 cents to 21 cents a barrel on volume of 4,058 lots at 2:41 p.m. February $75 puts were the second-most active, with 3,016 lots exchanged as they declined 6 cents to 27 cents.

Bets that prices would fall, or puts, accounted for 60 percent of electronic 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 and bearish bets were almost evenly split amid the 101,689 contracts traded.

February $110 calls were the most active options yesterday with 5,742 contracts changing hands. They were unchanged at 7 cents a barrel. February $72 puts fell 2 cents to 17 cents on 4,244 lots.

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 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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