Oil Options Surge as Futures Tumble on Inventory Build

Crude oil options volatility climbed for a third day as underlying futures slumped after a government report showed nationwide supplies dropped to the lowest level in 82 years.

Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 25.56 percent at 3:30 p.m. on the New York Mercantile Exchange, up from 22.8 percent yesterday.

West Texas Intermediate for June delivery retreated $2.43, or 2.6 percent, to settle at $91.03 a barrel on the Nymex, falling the most since April 15. The volume of all futures traded was 45 percent above the 100-day average at 2:33 p.m.

Oil stockpiles jumped to 395.3 million barrels in the seven days to April 26, the most since the government began gathering weekly data in 1982, according to U.S. Energy Information Administration data. According to monthly data, they were last at this level in 1931.

The most-active options in electronic trading today were June $90 puts, which rose 81 cents to $1.50 a barrel at 3:35 p.m. on 5,432 lots. The second-most active were June $80 puts, which gained 5 cents to 10 cents a barrel on volume of 4,255 contracts.

Puts, or bets that crude futures will fall, accounted for 65 percent of electronic trading volume and were the five most- traded contracts.

Put Skew

The so-called put skew, measuring the volatility of June puts and calls protecting against a 10 percent drop or rise in futures, increased to 11.3 percentage points from 9.6 yesterday.

Bullish bets, or bets that prices would rise, made up 51 percent of the volume of 150,271 contracts yesterday.

June $90 puts were the most-active options in the previous session, with 6,987 lots changing hands as they gained 23 cents to 69 cents a barrel. August $102.50 calls dropped 17 cents to 82 cents a barrel on volume of 5,060 contracts.

Open interest was highest for June $80 puts with 40,487 lots. Next were December $105 calls with 37,579 and December $110 calls with 34,144.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.