Crude Oil Volatility Rises as Crude Slides on Funding Impasse

Crude oil volatility rose as the underlying futures fell on concern that the U.S. government shutdown will slow economic growth and cut fuel demand.

Implied volatility for at-the-money November options, a measure of expected futures swings and a key gauge of value, rose to 19.8 percent at 4:40 p.m. on the New York Mercantile Exchange from 19.4 percent yesterday.

Puts, or bets that prices would fall, accounted for 57 percent of electronic trading volume today. The most active options were November $95 puts, which gained 2 cents to 9 cents a barrel on volume of 4,265 lots. With 2,927 contracts exchanging hands, November $100 puts were the second-most traded. They increased 14 cents to 54 cents a barrel

West Texas Intermediate for November delivery slid 79 cents, or 0.8 percent, to settle at $103.31 a barrel on the Nymex. Prices dropped from a two-week high as the first face-to-face talks between President Barack Obama and congressional leaders failed to break the budget logjam yesterday.

In the previous session, puts accounted for 53 percent of the 125,9563 lots traded.

November $95 puts were the most-active options yesterday, with 8,870 contracts trading as they slipped 16 cents to 5 cents a barrel. November $110 calls gained 7 cents to 15 cents.

Open interest was highest for December $80 puts, with 41,370 contracts. Next were December $90 puts with 41,259 lots and December $100 calls with 31,864.

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: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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