WTI Crude Put Skew Grows as Futures Slide to Five-Month Low

Crude oil put options rose as the underlying futures slid to the lowest level since May.

Implied volatility for puts protecting against a 10 percent drop in January prices increased to 24.56 percent on the New York Mercantile Exchange at 4:10 p.m. compared with 23.65 percent yesterday. The skew, or premium of 90-percent puts to 110-percent calls, rose to 6.4 percentage points from 5.94.

At-the-money January options, a measure of expected futures swings and a key gauge of value, rose to 18.75 percent from 18.27 percent.

West Texas Intermediate for January delivery declined $1.95, or 2 percent, to $93.52 a barrel on the Nymex. December-delivery WTI fell $2.10, or 2.2 percent, to $93.04 on speculation that U.S. oil stockpiles rose an eighth week.

Puts, or bets that prices would fall, accounted for 55 percent of electronic trading volume today. The most-active options were December $95 calls, which dropped 71 cents to 16 cents a barrel with 4,160 lots trading as of 4:28 p.m. December $90 puts rose 8 cents to 11 cents on volume of 4,150 lots.

In the previous session, puts accounted for 58 percent of the 85,721 lots traded. December $90 puts declined 5 cents to 3 cents a barrel on 4,296 contracts. December $95 puts fell 44 cents to 73 cents on volume of 4,028 lots.

Open interest yesterday was highest for December $80 puts, with 43,234 contracts. Next were December $90 puts with 38,327 lots and December $85 puts with 36,929.

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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