WTI Crude Options Volatility Climbs as Futures Slip Below $100

West Texas Intermediate crude options volatility rose above 14 percent for the first time in five days as West Texas Intermediate futures slipped below $100 a barrel.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, was 14.35 percent at 3:05 p.m. on the New York Mercantile Exchange, up from 13.72 on Dec. 27.

Volatility sank to 13.02 percent on Dec. 26, the lowest since at least 2006 amid low year-end volume and speculation prices won’t change significantly through the Christmas and New Year’s holidays.

“We were so low on Friday,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “There was a little bit of a pullback when people realized they were scraping the bottom of the basement last week.”

February futures fell $1.03, or 1 percent, to $99.29 a barrel on the Nymex, after settling above $100 on Dec. 27 for the first time since Oct. 18. Prices have fluctuated between $96.21 and $100.75 since Dec. 4. Trading volume was 48 percent below 100-day average as of 3:09 p.m.

Puts, or bets that crude oil prices would fall, accounted for 55 percent of electronic trading volume as of 3:09 p.m. The most active options were February $100 calls, which slipped 60 cents to 81 cents on volume of 2,494 lots. The second-most active were March $100 calls, down 53 cents to $1.78 on 1,235 contracts.

Puts accounted for 59 percent of the 80,650 lots traded in the previous session. April $70 puts slipped 1 cent to 3 cents on volume of 4,638 contracts. February $103 calls increased 14 cents to 31 cents on 3,056 lots.

Open interest was highest for June $80 puts, with 34,095 contracts. Next were June $85 puts with 25,770 lots and December 2015 $120 calls with 25,368.

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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