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Crude Volatility Rises with Futures on Libyan Production

Oct. 28 (Bloomberg) -- Crude options volatility rose with the underlying futures as Libyan output declined and on speculation that the U.S. Federal Reserve would maintain the pace of stimulus.

Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, was 19.56 percent at 3:05 p.m. on the New York Mercantile Exchange, up from 18.86 percent Oct. 25.

West Texas Intermediate crude for December delivery gained 0.8 percent to settle at $98.68 on the Nymex. Futures rallied after National Oil Corp. said crude output in Libya fell to 250,000 barrels a day because of labor protests. The Federal Open Market Committee, which opens a two-day meeting tomorrow, will probably delay the reduction of monthly bond purchases until March, according to a Bloomberg survey of economists.

Puts, or bets that prices would fall, made up 57 percent of volume in electronic trading today. The most active options were December $87 puts, which slid 3 cents to 5 cents a barrel on 1,749 contracts at 3:11 p.m. December $86 puts followed with 1,700 lots. They dropped 2 cents to 4 cents a barrel.

In the previous session, bearish bets accounted for 57 percent of the 92,917 contracts changing hands. December $90 puts were the most-active options on Oct. 25, with 5,307 contracts. They fell 15 cents to 18 cents a barrel. December $100 calls climbed 8 cents to 84 cents on volume of 4,833 lots.

Open interest was highest for December $80 puts, with 42,454 contracts. Next were December $90 puts with 42,145 lots and December $85 puts with 37,637.

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.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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