Crude Options Volatility Falls as Futures Hold Steady

Crude oil options volatility fell as the underlying futures were little changed.

Implied volatility for at-the-money options expiring in April, a measure of expected swings in futures and a gauge of options prices, was 20.1 percent at 4:10 p.m. on the New York Mercantile Exchange, down from 20.3 yesterday. Crude oil for April delivery dipped 8 cents to $96.26 a barrel on the Nymex. The more-active March futures dropped 11 cents to $95.72.

West Texas Intermediate, the benchmark for Nymex futures, widened its discount to Brent oil after China’s crude imports climbed to an eight-month high, signaling greater demand. The discount has widened since Jan. 31, when Enterprise Product Partners LP said capacity on its Seaway pipeline to the Gulf Coast from Cushing, Oklahoma, the delivery point for the New York contract, will be limited until late this year.

The most active options in electronic trading today were March $95 puts. They slid 11 cents to 66 cents a barrel on volume of 3,288 contracts. The second-most active were March $98 calls, which declined 10 cents to 19 cents a barrel, with 2,126 lots exchanged. March options expire on Feb. 14.

Bets that prices would fall, or puts, accounted for 56 percent of electronic trading volume.

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. In the previous session, puts accounted for 60 percent of volume.

March $95 puts were the most active traded options yesterday, with 5,328 contracts. They climbed 11 cents to 77 cents a barrel. April $110 calls dropped 2 cents to 10 cents a barrel on 4,369 lots.

Open interest was highest for March $85 puts with 42,677 contracts. Next were March $110 calls at 40,863 and March $115 calls at 30,934.

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