Crude Options Volatility Rises as Futures Fall Most in Month

Crude options volatility rose for the first time since Jan. 15 as futures slid after capacity was limited on the Seaway pipeline from Oklahoma to Texas.

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 and Enbridge Inc. 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 Volume

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.

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