Crude Volatility Falls as Oil Reaches Lowest Level Since Dec. 24

Crude options volatility slid as underlying futures fell to the lowest level since Dec. 24 amid concerns that fuel demand will decline.

Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 20.76 percent at 4:50 p.m. on the New York Mercantile Exchange, down from 20.93 percent yesterday.

West Texas Intermediate crude for April delivery dropped $1.37, or 1.5 percent, to settle at $90.68 a barrel on the Nymex as reports showed manufacturing contracted in China and the euro area. Prices touched $90.04 after trading in an intraday range from $91.57 to $94.92 for the previous six days.

The most-active options in electronic trading today were April $83 puts, which rose 7 cents to 14 cents a barrel on volume of 5,771 contracts at 4:52 p.m. in New York. April $95 calls were the second-most active with 3,517 lots. They declined 25 cents to 19 cents a barrel.

Puts accounted for 53 percent of electronic trading volume. In the previous session, bearish bets made up 58 percent of the 116,220 contracts traded.

June $80 puts were the most active options traded yesterday, with 6,071 contracts changing hands. They were down 7 cents to 77 cents a barrel. June $97.50 calls fell 42 cents to $1.77 on 4,545 lots.

Open interest was highest for December $105 calls with 35,244 contracts. Next were April $110 calls at 34,233 and June $90 puts at 32,440.

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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