WTI Options Volatility Jumps on Factory Data Weakness

Crude options volatility jumped as West Texas Intermediate futures dropped after manufacturing slowed last month in the U.S., China and the U.K.

Implied volatility for at-the-money March WTI options, a measure of expected futures movements and a key gauge of value, was 21.67 percent at 3:30 p.m., up from 18.99 percent on Jan. 31. Puts protecting against a 10 percent decline in prices jumped to 30.33 percent from 25.79. Calls protecting against a 10 percent increase rose to 22.61 percent from 21 percent.

WTI for March delivery fell $1.06, or 1.1 percent, to $96.43 a barrel on the New York Mercantile Exchange, the biggest decline since Jan. 8.

“You’re seeing fear come back into the market because the global economy is looking shakier because of weak manufacturing,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “There’s fear we could see bigger swings both ways in the next few days.”

Calls accounted for 52 percent of electronic trading volume. Most active were March $90 puts, which rose 5 cents to 13 cents a barrel with 2,454 lots trading at 3:58 p.m. March $100 calls dropped 18 cents to 33 cents on 2,241 lots.

In the previous session, bearish bets accounted for 59 percent of the 74,791 lots traded. March $90 puts gained 1 cent to 8 cents on a barrel on 4,008 contracts. June $86 puts were up 16 cents to $1.19 on volume of 3,716 lots.

Open interest was highest for June $80 puts with 39,064 contracts. Next were June $85 puts with 39,032 and December 2015 $120 calls with 27,648.

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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