Crude Options Voltaility Rises as Oil Sinks to 8-Week Low

Crude options volatility rose as oil fell to an eight-week low before the release of a government report that may show U.S. inventories rose.

Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 23.67 percent at 4:15 p.m. on the New York Mercantile Exchange, up from 22.53 percent yesterday.

West Texas Intermediate for April delivery dropped 48 cents to $92.63 a barrel on the Nymex, the lowest settlement since Dec. 31. Prices have declined 16 percent in the past year.

U.S. crude inventories probably rose 2.5 million barrels last week to 378.9 million, the highest level since July 20, according to the median estimate of 10 analysts surveyed by Bloomberg before the Energy Information Administration report scheduled for release tomorrow. The American Petroleum Institute reported oil inventories gained 904,000 barrels last week to 373.4 million.

The most-active options in electronic trading today were April $90 puts, which gained 13 cents to $1.02 a barrel on volume of 6,674 contracts at 4:55 p.m. April $80 puts were the second-most active with 2,534 lots. They were unchanged at 6 cents a barrel.

Puts accounted for 62 percent of electronic trading volume. In the previous session, bearish bets made up 54 percent of the 98,707 contracts traded.

April $90 puts were the most active options changing hands yesterday, with 4,024 contracts traded. They were down 9 cents to 89 cents a barrel. May $70 puts dropped 1 cent to 7 cents a barrel on 2,884 lots.

Open interest was highest for December $105 calls with 35,663 contracts. Next were April $110 calls at 34,301 lots and June $90 puts at 32,331.

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.

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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