Oil options volatility declined for the fifth day as crude fell after government data showed U.S. supplies rose to a five-month high and on expectations that the Federal Reserve won’t take new action to bolster the economy.
Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 28 as of 2:06 p.m. in New York, down from 29.4 yesterday and the lowest level for the contract.
Crude oil for April delivery rose 52 cents, or 0.5 percent, to settle at $107.07 a barrel on the New York Mercantile Exchange after touching $104.84 earlier. Futures reached a nine-month high of $109.95 a barrel in intraday trading on Feb. 24.
“The prospect of a supply disruption while the April contract is on the board has diminished greatly,” Ray Carbone, president of Paramount Options Inc. in New York, said by phone. “Prime Minister of Israel is coming to meet with President Obama, whatever it means, nothing will happen until that meeting. April contract volatility is down more than May and June because April doesn’t have a lot of time left.”
The most active options in electronic trading today were April $100 puts. They fell 6 cents to 61 cents a barrel with 3,608 contracts trading as of 2:15 p.m. in New York. Next were April $95 puts, which dropped 5 cents to 18 cents a barrel on 2,494 lots. A contract covers 1,000 barrels of crude. Puts were 58 percent of the volume.
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.
Calls accounted for 48 percent of the volume in the previous session. June $90 puts were the most actively traded options, with 10,042 lots changing hands. They added 23 cents to $1.31 a barrel. The next-most active options, April $100 puts, climbed 20 cents to 67 cents on volume of 4,974 lots.
April options expire on March 15.
Open interest was highest for December $80 puts with 45,933 contracts. Next were December $150 calls with 37,407 lots and December $100 calls with 34,426.