Crude Oil Volatility Rises as Futures Slide Below $100 a Barrel

Crude options volatility rose as futures slipped below a $100 a barrel amid rising stockpiles.

Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, was 19.79 percent at 2:20 p.m. on the New York Mercantile Exchange, from 19.06 percent on Oct. 18. Put options protecting against a 10 percent drop in prices increased to 26.56 percent from 25.4.

“We’ve crossed the Rubicon when we crossed that $100 a barrel threshold,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Now the fundamentals are heavy and people are starting to try to protect their oil position on the downside.”

West Texas Intermediate crude for December delivery fell $1.43, or 1.4 percent, to $99.68 a barrel on the Nymex. Futures slid after the Energy Information Administration said supplies rose 4 million barrels to 374.5 million in the week ended Oct. 11, the highest level in three months.

Puts, or bets that prices would fall, accounted for the three most popular options and 51 percent of electronic trading volume.

The most active options in electronic trading today were December $95 puts, which rose 17 cents to 67 cents a barrel with 3,283 lots trading as of 2:38 p.m. January $95 puts advanced 19 cents to $1.35 with volume of 2,996 lots.

Previous Session

In the previous session, puts accounted for 52 percent of the 115,515 lots traded.

December $100 puts were the most-active options yesterday, with 7,816 contracts trading as they declined 20 cents to $1.66 a barrel. December $90 puts fell 5 cents to 16 cents on volume of 7,154 lots.

Open interest in the prior session was highest for December $90 puts, with 45,009 contracts. Next were December $80 puts with 41,699 lots and December $95 calls with 33,618.

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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