Crude oil options volatility rose with the underlying futures on optimism lawmakers will reach a last-minute budget deal that would protect all but top earners from a tax increase that threatens economic growth.
Implied volatility for at-the-money options expiring in February, a measure of expected price swings in futures and a gauge of options price, was 26.18 percent at 2:05 p.m. on the New York Mercantile Exchange, up from 25.46 on Dec. 28.
Crude oil for February delivery rose 68 cents, or 0.8 percent, to $91.48 a barrel on Nymex, reversing an earlier loss of as much as 0.9 percent. Futures gained as Democrats and Republicans discussed how to avert more than $600 billion of tax increases and spending cuts.
“It appears” a fiscal cliff agreement is “within sight,” President Barack Obama said today at a White House event with middle-class Americans. The U.S. can tackle the deficit “in stages,” he later added.
If no deal is struck, the changes would cause a recession in the first half of 2013, according to the Congressional Budget Office.
The most active options in electronic trading today were February $80 puts, which declined 4 cents to 11 cents a barrel at 2:07 p.m. on volume of 982 contracts. The second-most active, with 852 lots exchanged, were February $100 calls, up 1 cent at 15 cents a barrel.
Bets that prices would rise, or calls, accounted for 54 percent of electronic trading volume.
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. deteriorating.
In the previous session, bets that prices would fall, or puts, accounted for 62 percent of volume.
February $85 puts were the most active options Dec. 28, with 4,586 contracts trading as they were unchanged at 53 cents a barrel. December 2014 $75 puts fell 4 cents to $5.60 a barrel on 2,000 lots.
Open interest was highest for February $105 calls with 37,001 contracts. Next were March $70 puts at 29,641 lots and February $100 calls with 26,746.