Crude Oil Options Volatility Falls to Six-Year Low Below 19%

Crude options volatility fell below 19 percent for the first time in at least six years as the underlying futures continued to climb.

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 18.54 percent on the New York Mercantile Exchange as of 3:40 p.m., compared with 19.25 percent Jan. 18.

It was the first time that volatility for the front-month options contract has dipped below 19 percent since at least March 2006, according to data compiled by Bloomberg. April options volatility slipped to 20.35 from 21.67 on Jan. 18. Volatility for options on the rolling second-month contract was the lowest since January 1996.

Oil futures for March delivery rose 64 cents to $96.68 a barrel on the Nymex, the fourth straight increase. February-delivery crude futures, which expire today, gained 68 cents to $96.24 a barrel, the highest settlement since Sept. 17.

Rising crude prices have damped the enthusiasm of oil producers who buy puts, or bets that prices will fall, said Jim Colburn, a vice president and energy options broker at Jefferies Bache LLC in New York.

“The market has got quiet,” Colburn said. “There’s no urgency to buy puts right now when we’re going higher.”

The most-active options in electronic trading today were March $83 puts, which fell 5 cents to 6 cents a barrel on volume of 2,929 contracts at 2:53 p.m. in New York. March $90 puts were the second-most active with 2,366 lots. They declined 14 cents to 35 cents a barrel.

Puts Volume

Puts accounted for 62 percent of electronic trading volume of 42,616 lots. In the previous session, puts accounted for 58 percent of the 71,095 contracts traded.

March $90 puts were the most active options traded Jan. 18, with 3,549 contracts changing hands. They declined 14 cents to 49 cents a barrel. March $120 calls were unchanged at 3 cents on 2,423 lots.

Open interest was highest for March $110 calls with 41,201 contracts. Next were March $85 puts at 30,470 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.

Before it's here, it's on the Bloomberg Terminal.