Jan. 13 (Bloomberg) -- West Texas Intermediate crude options volatility jumped to the highest level since Nov. 29 as futures approached an eight-month low.
Implied volatility for at-the-money March WTI options, a measure of expected futures movements and a key gauge of value, was 19.57 percent at 3:35 p.m. on the New York Mercantile Exchange, up from 18.27 percent on Jan. 10.
Volatility for puts protecting against a 10 percent decline in futures rose to 24.45 percent from 22.92 percent. Calls protecting against a 10 percent rise advanced to 19.18 percent from 17.72 percent.
“People are starting to realize the last time we were at these levels we had a nine dollar rally and there’s an increased risk for a big move either up or down,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “There’s more of a bearish bias, but people are hedged for the possibility of a rally.”
WTI for February delivery fell 92 cents, or 1 percent, to $91.80 a barrel on the Nymex and touched $91.43. Prices reached $91.24 on Jan. 9, the lowest intraday level since May 2. The March contract slipped 94 cents to $92.01.
Traders bought June straddles, including $92 calls and puts, said Michael Truscelli, a broker and trader for Paramount Options Inc. in New York. Purchasing a straddle involves buying a call and a put at the same strike price, to benefit from a move up or down.
The six most-active options in economic trading as of 3:40 p.m. were puts, accounting for 62 percent of the volume. The most active options were February $90 puts, which rose 5 cents to 15 cents a barrel on volume of 3,915 lots. Second-most active were March $80 puts, up 3 cents to 10 cents on 2,742 contracts.
In the previous session, puts accounted for 52 percent of trading volume of 107,361. February $90 puts fell 22 cents to 10 cents on 5,292 lots. February $95 calls increased 3 cents to 9 cents on volume of 3,397 contracts.
Open interest was highest for June $80 puts, with 35,182 contracts. Next were June $85 puts with 28,149 lots and December 2015 $120 calls with 26,947.
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.
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