Oil Options Volatility Drops to Near 17% on Narrow Trading Range

Crude options volatility fell to near 17 percent as underlying oil futures have settled into a range of less than $4 a barrel since March 5.

Implied volatility for at-the-money options expiring in May, a measure of expected price swings in futures and a gauge of options prices, was 17.17 percent on the New York Mercantile Exchange as of 4:01 p.m., compared with 18.23 percent yesterday.

“Everything is flattening out,” said Carl Larry, a commodities broker at Atlas Commodities LLC in Houston. “It’s hard to take a side in either direction if there is no direction.”

West Texas Intermediate crude for May delivery rose 50 cents to settle at $93.38 a barrel on the Nymex. Since March 5, the May contract has traded in an intraday range from $90.04 to $93.90.

The most-active options in electronic trading today were May $90 puts, which retreated 23 cents to 80 cents a barrel on volume of 3,470 contracts at 4:08 p.m. May $83 puts were the second-most active with 3,427 lots. They dropped 5 cents to 10 cents a barrel.

Puts accounted for 53 percent of electronic trading volume. In the previous session, calls made up 51 percent of the 113,007 contracts traded.

June $85 puts were the most active options traded yesterday, with 3,744 contracts changing hands. They fell 3 cents to 76 cents a barrel. June $80 puts declined 1 cent to 29 cents a barrel on 3,554 lots.

Open interest was highest for December $105 calls with 36,108 contracts. Next were April $110 calls at 34,170 and June $90 puts at 32,011.

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

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