Crude Options Volatility Gains as Futures Reach 16-Month High

Crude options volatility increased for the first time in three days as underlying futures touched a 16-month high.

Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options value, was 21.77 percent on the New York Mercantile Exchange as of 4:35 p.m., up from 20.22 yesterday.

West Texas Intermediate crude for September delivery advanced 6 cents to settle at $107.87 a barrel on the Nymex. The front-month August contract touched $109.32 before settling up 1 cent at $108.05, the highest level for the front-month contract since March 19, 2012.

Calls protecting against a 10 percent rise in prices jumped to 24.47 percent from 22.41, while puts that profit from a 10 percent price drop increased to 28.63 percent from 27.72 yesterday.

The most-active options in electronic trading today were December $70 puts, which were unchanged at 13 cents a barrel on volume of 5,001 lots traded as of 4:23 p.m. September $112 calls were the second-most active, gaining 24 cents to $1.11 on volume of 4,426 contracts.

Puts accounted for 53 percent of electronic trading volume. In the prior session, bullish options made up 54 percent of 177,037 contracts exchanged.

September $120 calls were the most-active options yesterday, with 6,919 contracts changing hands as they increased 4 cents to 14 cents a barrel. September $100 puts dropped 20 cents to 51 cents on 6,799 lots.

Open interest was highest for September $90 puts, with 40,803 contracts. Next were December $80 puts with 39,016 lots and December $90 puts with 37,373.

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: 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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