Crude Oil Calls Rise as Underlying Futures at Two-Year High
Crude oil calls rose as underlying futures climbed to a two-year high amid falling supplies at a key U.S. hub and rising tensions between the U.S. and Russia over a potential American strike against Syria.
Implied volatility of calls protecting against a 10 percent increase in October futures prices on the New York Mercantile Exchange rose to 32.76 percent at 4:35 p.m. from 31.64 percent yesterday.
“They’re hedging against the worst-case scenario against a possible disruption of supply,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Call buying accelerated as these tensions don’t seem to be going away.”
West Texas Intermediate crude for October delivery gained $2.16 to $110.53 a barrel on the Nymex, the highest settlement since May 3, 2011.
Crude rose as Russian President Vladimir Putin said he will continue supporting Syria if the U.S. launches a strike, increasing concern that escalating tension will disrupt Middle East oil exports. Supplies at Cushing, Oklahoma, the delivery point for the Nymex contract, are the lowest since February 2012.
The most active options in electronic trading today were October $115 calls, which rose 20 cents to 54 cents a barrel with 2,980 lots trading as of 4:44 p.m. November $95 puts were the second-most active, falling 7 cents to 34 cents a barrel on volume of 2,742 contracts.
“On the put side, if history is any guide, usually any actions cause a quick sharp rally and then a reversal,” Flynn said.
At-the-money volatility for October options, a measure of expected futures swings and a key gauge of value, slipped to 24.8 percent from 25.39 percent yesterday. Volatility for puts covering a 10 percent drop rose to 29.8 percent from 29.58 percent.
Inventories at Cushing fell 1.83 million barrels last week to 34.8 million, Energy Information Administration data show.
Puts accounted for 54 percent of electronic trading volume today. In the previous session, calls made up 56 percent of the 99,427 lots traded.
December 2015 $120 calls were the most-active options yesterday with 6,000 contracts changing hands as they gained 3 cents to $1.12 a barrel. November $140 calls, the next-most active, rose 1 cents to 12 cents on 3,997 lots.
Open interest was highest for December $80 puts, with 40,925 contracts. Next were December $90 puts with 37,181 lots and December $105 calls with 34,816.
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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