Crude Options Volatility Rises as Futures Slide a Second Day
Crude options volatility rose as underlying futures fell a second day after British lawmakers refused to join the U.S. in a military strike against Syria and an attack by the U.S. didn’t appear imminent.
Implied volatility for at-the-money October options, a measure of expected futures swings and a key gauge of value, was 26.14 percent at 3:28 p.m. on the New York Mercantile Exchange, up from 25.67 yesterday.
West Texas Intermediate crude for October delivery fell $1.15 to $107.65 a barrel on the Nymex, after reaching a two-year high of $110.10 two days ago. Crude advanced 2.5 percent this month.
U.S. lost Britain’s support yesterday in acting against Syria and its suspected use of chemical weapons, lessening concern of an imminent strike that might embroil the Middle East and disrupt oil supplies. Secretary of State John Kerry said today that a U.S. intelligence assessment gives him “high confidence” that the Syrian regime employed chemical weapons against its own people. Without a response from the U.S., Kerry said, “there will be no end to the test of our resolve.”
WTI may increase next week on the prospect of an attack against Syria, according to a slim margin in a Bloomberg survey of 37 analysts and traders. Sixteen, or 43 percent, forecast futures will gain through Sept. 6, while 15 respondents predicted a drop and six said there will be no change.
The most active options in electronic trading today were October $120 calls, which fell 7 cents to 22 cents a barrel with 3,199 lots trading as of 3:32 p.m. October $100 puts were the second-most active, advancing 13 cents to 37 cents a barrel on volume of 2,411 contracts.
Calls accounted for 60 percent of electronic trading volume today, and made up four of the five most-active contracts. In the previous session, bullish bets made up 53 percent of the 140,430 lots traded.
March $90 puts were also the most-active options yesterday with 5,836 contracts changing hands as they gained 16 cents to $2.44 a barrel. October $120 calls, the next-most active, fell 32 cents to 29 cents on 5,774 lots.
Open interest was highest for December $80 puts, with 40,948 contracts. Next were December $90 puts with 37,023 lots and December $105 calls with 34,815.
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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