Crude Options Volatility Falls as Oil Slips on Higher Supplies

Crude oil options volatility fell as futures rose after the government reported an inventory increase and President Obama prepared to begin fiscal negotiations with a divided Congress.

Implied volatility for at-the-money options expiring in January, a measure of expected price swings in futures and a gauge of options prices, was 29.5 percent on the New York Mercantile Exchange as of 3:45 p.m., down from 29.82 percent yesterday.

January-delivery crude oil declined 88 cents, or 1 percent, to settle at $85.87 a barrel on the Nymex.

U.S. supplies of oil rose 1.09 million barrels to 375.9 million last week, the highest level since July 20, according to Energy Department data

Obama will meet with Democratic and Republican congressional leaders tomorrow to try to avert $607 billion in automatic tax increases and spending cuts scheduled to take effect next year.

The most active options in electronic trading today were January $95 calls, which fell 13 cents to 50 cents a barrel on volume of 3,527 lots at 3:52 p.m. January $125 calls were the second-most active, with 2,588 lots exchanged as they increased 1 cent to 3 cents a barrel.

Bets that prices would rise, or calls, accounted for 53 percent of the 47,897 lots traded.

Exchange Data

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.

In the previous session, bullish bets made up 62 percent of the 140,801 contracts traded.

January $105 calls were the most actively traded options yesterday with 17,632 contracts. They rose 6 cents to 19 cents a barrel. January $115 calls advanced 3 cents to 9 cents on volume of 6,317 lots.

Open interest was highest for January $110 calls, with 38,406 contracts. Next were January $105 calls, with 37,629 lots, and January $60 puts with 34,883.

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