WTI Options Volatility Rises as Futures Drop Most in Two Weeks

Crude oil options volatility climbed for the first time in eight sessions as West Texas Intermediate futures tumbled the most in two weeks.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, rose to 16.14 percent at 4:10 p.m. on the New York Mercantile Exchange from 15.69 yesterday.

“People are playing both sides,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “They’re feeling there’s a little bit more risk in the market and toward the end of the year, you get these crazy moves that people want to protect themselves from.”

WTI for February delivery declined 94 cents, or 1 percent, to settle at $97.72 a barrel on the Nymex. The January contract fell from a six-week high, slipping $1.07 to $97.44 a barrel.

Puts, or bets that prices would fall, accounted for 60 percent of electronic trading volume as of 4:17 p.m.

The most-active options were January $96 puts, which rose 7 cents to 22 cents with 4,066 lots trading. January $95 puts, the second-most active, advanced 3 cents to 11 cents on volume of 2,949.

In yesterday’s session, of the 116,577 lots traded, puts accounted for 58 percent of the volume. January $95 puts fell 15 cents to 8 cents a barrel on 5,281 contracts. January $100 calls advanced 14 cents to 28 cents on volume of 4,038 lots.

Open interest in the previous session was highest for June $80 puts, with 28,870 contracts. Next were January $75 puts with 27,261 lots and June $85 puts with 26,198.

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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