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Crude Oil Options Volatility Is Less Than 25% for Sixth Day

Crude options volatility was below 25 percent for a sixth day as underlying futures moved 20 cents or less for the fifth session.

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 22.25 percent on the New York Mercantile Exchange at 3:55 p.m., up from 20.46 percent yesterday.

February-delivery crude oil fell 5 cents to settle at $93.10 a barrel on the Nymex. Trading volume was 9.2 percent below the 100-day average. Since Dec. 27, crude has traded in an intraday range between $90 to $93.87.

Volatility has lessened and oil prices have been little changed since Congress approved a budget deal Jan. 2 to avert the fiscal cliff, spending cuts and higher taxes for most Americans that threatened the U.S. economy.

“Volatility is usually low after the holidays but this is the lowest since 1994,” said Ray Carbone, president of Paramount Options Inc. in New York. “Interest in trading is at a low, a hangover of regulatory fears, contraction of the trading groups and banks, and the market has not moved much since the reaction to the fiscal cliff. When the market moves sideways, risk reward isn’t there.”

The most-active options in electronic trading today were March $115 calls, which were unchanged at 6 cents a barrel on volume of 2,766 contracts at 4:37 p.m. in New York. February $90 puts were the second-most active, with 2,183 lots exchanged as they fell 6 cents to 21 cents a barrel.

Puts Dominate

Puts accounted for 53 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.

In the previous session, bearish bets accounted for 50.4 percent of the 122,784 contracts traded.

March $110 calls were the most active options with 6,383 contracts changing hands. They declined 1 cent to 9 cents a barrel. June $115 calls fell 3 cents to 52 cents on 4,077 lots.

Open interest was highest for February $105 calls with 32,389 contracts. Next were March $70 puts at 27,583 and February $110 calls at 25,926.

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