Crude Options Volatility Rises as Futures Fall Most in Month
Implied volatility for at-the-money options expiring in March, a measure of expected price swings in futures and a gauge of options prices, was 20.01 percent on the New York Mercantile Exchange as of 4:55 p.m., compared with 19.02 percent yesterday.
West Texas Intermediate crude for March delivery fell $1.45, or 1.5 percent, to $95.23 a barrel on the Nymex, the largest decline since Dec. 21. WTI’s discount to Brent, the London benchmark crude, widened $1.83 to $17.57.
Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) told shippers today that capacity would be limited to 175,000 barrels a day on the Seaway pipeline that links the Cushing, Oklahoma, oil storage hub to the Gulf Coast. The line was in the process of increasing to 400,000 barrels a day.
“This could back things up at Cushing again and will put pressure on the WTI-Brent spread,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London.
The most-active options in electronic trading today were March $95 puts, which rose 37 cents to $1.58 a barrel on volume of 2,499 contracts at 4:22 p.m. in New York. March $105 calls were the second-most active with 1,805 lots. They declined 2 cents to 7 cents a barrel.
Puts accounted for 62 percent of electronic trading volume of 39,048. In the previous session, the bearish bets made up 51 percent of the 111,818 contracts traded.
March $95 puts were the most active options traded yesterday, with 4,194 contracts changing hands. They declined 37 cents to $1.21 a barrel. March $105 calls fell 3 cents to 9 cents on 3,818 lots.
Open interest was highest for March $110 calls with 40,851 contracts. Next were March $85 puts at 30,508 and March $70 puts at 26,929.
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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