Crude Oil Options Fall as Futures Gain on U.S. Optimism

Oil options volatility slipped while the underlying futures rose as data on housing starts and a jobless claims bolstered optimism for the U.S. economy and petroleum demand.

Implied volatility for at-the-money options expiring in March, a measure of expected price swings in futures and a gauge of options prices, was 20.83 percent at 4:05 p.m. on the New York Mercantile Exchange, down from 22.21 yesterday.

Crude oil for February delivery advanced $1.25 to $95.49 a barrel on Nymex, the highest settlement since Sept. 17. The March contract increased $1.26 to $95.94. Prices rose after a Labor Department report showed applications for jobless benefits fell to the least since January 2008. Housing starts climbed 12.1 percent to a 954,000 annual rate in December, the Commerce Department said today.

“The tendency of crude oil is for volatility to drop when prices go up,” said Jim Colburn, a vice president and energy option broker at Jefferies Bache LLC in New York.

The most active options in electronic trading today were March $80 puts on volume of 3,174 contracts. They slipped 6 cents to 7 cents a barrel. The second-most active, with 2,693 lots exchanged, were March $90 puts, which slipped 30 cents to 64 cents a barrel.

Bets that prices would fall, or puts, accounted for 58 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, puts accounted for 61 percent of volume.

March $80 puts were the most active options yesterday, with 8,958 contracts trading as they fell 3 cents to 13 cents a barrel. March $85 puts slipped 12 cents to 35 cents a barrel on 7,572 lots.

Open interest was highest for March $110 calls with 36,315 contracts. Next were March $85 puts at 29,876 and March $70 puts at 26,909.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

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

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