Crude Call Options Surge as Syria Concern Sparks Futures Rally
Crude oil call options surged as futures rallied on concern that supplies from the Middle East may be disrupted if the U.S. and its allies attack Syria over its use of chemical weapons against civilians.
Implied volatility of October calls protecting against a 10 percent rise in futures prices jumped to 29.39 percent at 2:15 p.m. from 22.73 yesterday as futures gained the most since May 2. Volatility for puts covering a 10 percent drop was little changed, climbing to 25.58 percent from 25.23.
“Because of the imminent strike and risk to supply, people are trying to hedge their position, buying options in case of worst case scenario or you’re just adventurous and want to try and capitalize on a big move in the market,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Vol could go up again tomorrow if they are striking on Thursday.”
Implied volatility for at-the-money October options, a key gauge of options value, was 24.44 percent on the New York Mercantile Exchange, up from 21.22 percent yesterday. Volatility for the nearest-month options is at the highest level since May 1.
West Texas Intermediate crude for October delivery increased $3.09 to $109.01 a barrel on the Nymex, after touching $109.32.
The most active options in electronic trading today were October $115 calls, which rose 59 cents to 76 cents at 2:25 p.m. on volume of 6,093 contracts. October $100 puts were the second-most active, dropping 24 cents to 22 cents a barrel on volume of 5,280 lots traded.
Calls accounted for 59 percent of electronic trading volume. In the previous session, bearish bets made up 62 percent of the 49,647 lots traded.
October $96 puts were the most-active options yesterday with 2,508 contracts changing hands as they fell 2 cents to 13 cents a barrel. October $100 puts, the next-most active, declined 1 cent to 46 cents on 2,359 lots.
Open interest was highest for December $80 puts, with 40,064 contracts. Next were December $90 puts with 36,184 lots and December $105 calls with 35,347.
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.
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