Crude-oil options volatility rose to the highest level since January as underlying futures fell, capping the biggest monthly loss since December 2008, on concern that U.S. and European economic growth is slowing.
Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 31.94 percent at 3:15 p.m. on the New York Mercantile Exchange, up from 29.98 percent yesterday.
“We’re at substantially lower prices here and breaking out of the lower end of the range,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “No one is ready to be long oil. We’ve got the potential to get down to $80 now.”
Crude oil for July delivery fell $1.29, or 1.5 percent, to settle at $86.53 a barrel on the Nymex, the lowest settlement since Oct. 20. Prices fell 17 percent this month and have lost 21 percent since their year-to-date high settlement of $109.77 on Feb. 24.
Futures slipped after U.S. jobless claims rose and the U.S. grew more slowing in the first quarter than previously estimated, raising concern fuel demand would decline. Fitch Ratings downgraded eight Spanish regions’ credit, increasing speculation Europe’s debt crisis is spreading.
The most active oil options in electronic trading today were July $75 puts, which rose 3 cents to 15 cents a barrel at 3:25 p.m. with 3,939 lots trading. July $90 calls were the second-most active options with 2,855 lots changing hands as they fell 36 cents to 85 cents.
Puts accounted for 59 percent of electronic trading volume. One contract covers 1,000 barrels of crude.
The exchange distributes real-time data for electronic trading and releases information the next business day on floor trading, where the bulk of options trading occurs.
Bearish bets accounted for 56 percent of the 231,928 trades in the previous session. December $65 puts were the most actively traded, with 15,645 lots changing hands. They rose 32 cents to $1.20 a barrel. The next-most active options, December $80 puts, rose 88 cents to $4.10 on volume of 13,580.
Open interest was highest for December $80 puts with 45,486 contracts. Next were December $150 calls with 35,937 lots and December $70 puts with 35,465.