Oil options volatility weakened as the underlying crude futures dropped from a 26-month high on increased investor sales after the contract failed to hold above a $90 resistance level.
Implied volatility for at-the-money options expiring in February, a measure of expected price swings in futures and a gauge of options prices, was 31.1 percent as of 4 p.m. in New York, down from 31.8 percent yesterday.
Crude oil for January delivery declined 69 cents to settle at $88.69 a barrel on the New York Mercantile Exchange.
Crude oil slipped 0.8 percent after touching $90.76 a barrel earlier today when President Barack Obama said that he’ll agree to a two-year extension on all tax cuts introduced by President George W. Bush in a compromise he called “an essential step on the road to recovery.”
March $70 puts were the most active options in electronic trading today with 6,828 lots changing hands as of 4:19 p.m. They were unchanged at 36 cents a barrel. January $85 puts, the next-most active contract, rose 16 cents to 59 cents a barrel with 2,571 contracts trading.
The exchange distributes real-time data for electronic trading and releases information on floor trading, where the bulk of options trading occurs, the next business day.
February $80 puts were the most active options traded yesterday with 8,926 lots changing hands. They fell 6 cents to 81 cents. June $120 calls, the next-most active option, dropped 3 cents to 73 cents with 5,900 contracts traded.
Open interest was highest yesterday for December 2011 $100 calls with 45,812 contracts. Next were December 2011 $120 calls with 32,400 and February $100 calls at 28,917 lots.