Oil Options Volatility Falls as Futures Rise on Fed Asset Buying

Crude oil options volatility fell while the underlying futures climbed to a four-month high as the Federal Reserve maintained an asset-buying program to boost the economy.

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 18.92 percent at 4:20 p.m. on the New York Mercantile Exchange, down from 19.71 yesterday.

Crude oil for March delivery rose 37 cents to $97.94 a barrel on the Nymex, the highest settlement price since Sept. 14. Oil advanced for a third day after the Fed said at the conclusion of a two-day meeting that it will keep purchasing securities at the rate of $85 billion a month.

The most active options in electronic trading today were March $115 calls, which were unchanged at 3 cents a barrel on volume of 5,800 contracts. The second-most active, with 1,732 lots exchanged, were April $90 puts, which fell 6 cents to 72 cents a barrel.

Bets that prices would decline, or puts, accounted for 57 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 54 percent of volume.

March $95 puts were the most active options yesterday, with 8,823 contracts trading as they fell 34 cents to 77 cents a barrel. April $90 puts slipped 12 cents to 78 cents a barrel on 4,797 lots.

Open interest was highest for March $110 calls with 42,681 contracts. Next were March $85 puts at 33,399 and March $80 puts at 27,399.

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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