Crude Options Volatility Declines as Futures Rise on Fed Pledge

Crude options volatility fell after futures jumped 1.9 percent as the Federal Reserve kept the pace of its bond-buying intact to boost the economy.

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 21.57 percent on the New York Mercantile Exchange at 3:40 p.m., down from 22.12 yesterday.

The Fed pledged to keep buying $85 billion in bonds every month and said persistently low inflation could hamper the economic expansion. Investors had been awaiting signals that the Fed might taper its efforts.

“We might be further away from tapering and that is especially bullish for oil,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

West Texas Intermediate crude for September delivery rose $1.95 to settle at $105.03 a barrel on the Nymex.

The most active options in electronic trading today were September $94 puts, which fell 9 cents to 5 cents a barrel on volume of 4,081 lots traded as of 3:41 p.m. December $75 puts were the second-most active, dropping 4 cents to 19 cents on volume of 4,017 contracts.

Puts accounted for 64 percent of electronic trading volume. In the prior session, bearish bets made up 51 percent of 128,393 contracts exchanged.

September $95 puts were the most-active options yesterday with 11,257 contracts changing hands as they increased 7 cents to 18 cents a barrel. September $105 calls fell 62 cents to $1.05 on 5,737 lots.

Open interest was highest for December $80 puts, with 38,482 contracts. Next were December $90 puts with 37,373 lots and December $110 calls with 34,041.

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: Barbara Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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