Crude Volatility Rises as Deadline to Avert U.S. Default Nears

Crude oil options volatility rose after underlying futures swung between gains and losses as the Oct. 17 deadline for the U.S. to raise the debt ceiling neared.

Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, rose to 21.06 percent at 3:15 p.m. the New York Mercantile Exchange from 20.14 percent on Oct. 11.

“There’s more nervousness as we get closer to the deadline, and it’s picking up the vol a little,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

West Texas Intermediate crude for December delivery rose 42 cents to settle at $102.48 a barrel on the Nymex, after swinging between $101.13 and $102.67.

U.S. Senate Democrat and Republicans leaders said they’re optimistic about ending the 14-day-old government shutdown and preventing the nation from breaching the debt ceiling in three days.

Electronic trading volume today was nearly evenly divided between puts and calls.

The most active options in electronic trading today were January 80 puts, which slipped 1 cent to 15 cents a barrel with 1,886 lots trading as of 3:35 p.m. December $100 puts fell 8 cents to $1.65 with volume of 1,716 lots.

Previous Session

In the previous session, puts accounted for 60 percent of the 87,498 lots traded.

November $100 puts were the most-active options on Oct. 11, with 4,058 contracts trading as they advanced 6 cents to 41 cents a barrel. November $105 calls fell 27 cents to 15 cents on volume of 3,548 lots.

Open interest in the prior session was highest for December $90 puts, with 43,171 contracts. Next were December $80 puts with 41,766 lots and December $100 calls with 32,679.

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: Barbara Powell in Houston at bpowell4@bloomberg.net

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

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