Crude Volatility Rises with Futures on Libyan Production

Crude options volatility rose with the underlying futures as Libyan output declined and on speculation that the U.S. Federal Reserve would maintain the pace of stimulus.

Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, was 19.56 percent at 3:05 p.m. on the New York Mercantile Exchange, up from 18.86 percent Oct. 25.

West Texas Intermediate crude for December delivery gained 0.8 percent to settle at $98.68 on the Nymex. Futures rallied after National Oil Corp. said crude output in Libya fell to 250,000 barrels a day because of labor protests. The Federal Open Market Committee, which opens a two-day meeting tomorrow, will probably delay the reduction of monthly bond purchases until March, according to a Bloomberg survey of economists.

Puts, or bets that prices would fall, made up 57 percent of volume in electronic trading today. The most active options were December $87 puts, which slid 3 cents to 5 cents a barrel on 1,749 contracts at 3:11 p.m. December $86 puts followed with 1,700 lots. They dropped 2 cents to 4 cents a barrel.

In the previous session, bearish bets accounted for 57 percent of the 92,917 contracts changing hands. December $90 puts were the most-active options on Oct. 25, with 5,307 contracts. They fell 15 cents to 18 cents a barrel. December $100 calls climbed 8 cents to 84 cents on volume of 4,833 lots.

Open interest was highest for December $80 puts, with 42,454 contracts. Next were December $90 puts with 42,145 lots and December $85 puts with 37,637.

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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