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Crude Options Volatility Falls With Decline in December Futures

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Nov. 7 (Bloomberg) -- Crude options volatility fell with underlying West Texas Intermediate futures after the European Central Bank unexpectedly cut its benchmark interest rate.

Implied volatility for at-the-money December options, a measure of expected futures swings and a key gauge of value, was 19.62 percent at 4 p.m. on the New York Mercantile Exchange, down from 20.76 at settlement yesterday.

West Texas Intermediate crude for December delivery dropped 60 cents, to settle at $94.20 a barrel on the Nymex. WTI fell as Brent crude dropped to the lowest level in more than four months as the euro tumbled against the dollar after the ECB’s move.

Puts accounted for 50.8 percent of electronic trading volume today. The most-active options were December $90 puts, which fell 1 cents to 15 cents a barrel with 3,379 lots trading as of 4:44 p.m. December $92 puts rose 1 cent to 40 cents on volume of 2,802.

In the previous session, puts accounted for 57 percent of the 120,741 lots traded. December $90 puts fell 21 cents to 16 cents a barrel with 6,191 contracts trading. December $88 puts fell 10 cents to 7 cents on volume of 4,914 lots.

Open interest yesterday was highest for December $80 puts, with 43,336 contracts. Next were December $90 puts with 39,928 lots and December $85 puts with 36,135.

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: Eliot Caroom in New York at ecaroom@bloomberg.net

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

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