Crude Puts Rise on Speculation More Supply Will Pressure Futures
Crude oil puts rose on speculation that increasing oil supplies and lower fuel demand amid a partial U.S. government shutdown will depress crude futures.
Implied volatility of puts protecting against a 10 percent drop in December futures prices on the New York Mercantile Exchange, a measure of expected futures swings and a key gauge of value, rose to 25.61 percent at 2:45 p.m. from 24.68 percent yesterday. Puts accounted for 69 percent of electronic trading volume today, and the seven most active options in electronic trading today were puts for November, December and January.
“We’re seeing people buying puts,” said Selo Kraja, a senior account executive at Price Futures Group in Chicago. “There’s a lot of interest in December and January, short-term for $102 and $100 puts and longer-term for $87, $88 and $89 puts.
November $100 puts, the most active contract in electronic trading, fell 8 cents to 37 cents a barrel with 4,002 lots trading as of 3 p.m. December $87 puts climbed 1 cent to 12 cents a barrel on volume of 2,519 contracts.
At-the-money volatility for December options rose to 20.58 percent from 20.39 yesterday.
U.S. crude inventories surged 5.47 million barrels to 363.7 million in the week ended Sep.t 27, the biggest gain since April, Energy Information Administration data show. The EIA will probably report tomorrow that stockpiles increased 1.55 million barrels last week, according to the median estimate of 10 estimates in a survey by Bloomberg.
West Texas Intermediate crude for December delivery climbed 48 cents to settle at $103.31 a barrel on the Nymex. The front-month November contract, which will expire Oct. 22, gained 46 cents to $103.49.
Prices rose as President Barack Obama reiterated that he won’t negotiate with Republicans over the shutdown and the U.S. debt limit. The U.S. will run out of borrowing authority on Oct. 17 unless the debt ceiling is raised. Congress has been unable to hammer out a spending bill.
In the previous session, puts accounted for 54 percent of the 89,524 lots traded.
November $108 calls were the most-active options yesterday with 7,519 contracts changing hands as they lost 16 cents to 10 cents a barrel. November $98 puts, the next-most active, advanced 4 cents to 21 cents on volume of 6,361 lots.
Open interest was highest for December $80 puts, with 40,831 contracts. Next were December $90 puts with 40,780 lots and December $100 calls with 31,859.
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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