Crude call option volatility climbed as West Texas Intermediate futures rallied for a fourth day to a five-week high.
Implied volatility for calls protecting against a 10 percent gain in February West Texas Intermediate futures was 17.52 percent at 4:10 p.m. on the New York Mercantile Exchange, up from 17.06 percent yesterday. Puts protecting against a 10 percent decline slipped to 21.74 percent from 22.22 percent.
WTI for February delivery gained $1.16, or 1.2 percent, to $97.43 a barrel on the Nymex. The January contract gained the same amount to $97.20, the highest settlement since Oct. 29. Prices have jumped 5.3 percent in four days of gains.
“A lot of people didn’t believe the price would be above $97 this quickly,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “People were either protecting short positions by buying calls or just getting long because the market is starting to get more bullish.”
At-the-money February WTI options, a measure of expected futures movements and a key gauge of value, fell to 17.45 percent from 17.78 percent in the prior session.
Calls, or bets that prices would rise, accounted for 53 percent of electronic trading volume as of 4:17 p.m.
The most-active options were January $100 calls, which rose 13 cents to 29 cents with 6,318 lots trading. January $91 puts, the second-most active, declined 8 cents to 6 cents on volume of 4,209. January $101 calls jumped 6 cents to 15 cents on 3,568 lots and January $94 puts retreated 28 cents to 27 cents with 3,147 lots traded.
Flynn said there was a lot of so-called collar buying “where you’re buying out-of-the-money calls and out-of-the-money puts to protect yourself if there’s a move either way.”
In yesterday’s session, of the 169,325 lots traded, calls accounted for 48 percent of the volume. January $100 calls rose 10 cents to 16 cents a barrel on 11,533 contracts. January $90 puts declined 23 cents to 9 cents on volume of 9,064 lots.
Open interest in the previous session was highest for June $80 puts, with 28,976 contracts. Next were January $75 puts with 27,261 lots and January $85 puts with 25,749.
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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