Oil Options Volatility Rises as Deadline Nears on Budget Deal
Crude options volatility rose as the deadline neared for reaching a federal budget deal before automatic spending cuts and tax increases take effect.
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 25.56 percent on the New York Mercantile Exchange as of 2:55 p.m., an increase from 24.95 percent yesterday.
February-delivery crude oil declined 7 cents to settle at $90.80 a barrel on the Nymex. Prices have fallen 8.1 percent this year.
President Barack Obama was set to propose a scaled-back fiscal package at a meeting today with congressional leaders to avert tax and spending changes that could trigger a recession in 2013, a Democratic aide with knowledge of the talks said.
The most active options in electronic trading today were February $85 puts, which fell 1 cent to 52 cents a barrel on volume of 2,453 contracts at 3 p.m. in New York. February $95 calls were the second-most active, with 1,252 lots exchanged as they held steady at 65 cents a barrel.
Bets that prices would fall, or puts, accounted for 64 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, bearish bets accounted for 62 percent of the 80,786 contracts traded.
February $80 puts were the most active options yesterday with 7,325 contracts changing hands. They fell 2 cents to 17 cents a barrel. February $72 puts were unchanged at 3 cents a barrel on 5,529 lots.
Open interest was highest for February $105 calls with 36,976 contracts. Next were March $70 puts at 29,037 lots and February $110 calls at 26,147.
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