Crude Oil Options Volatility Declines as New York Futures Slip

U.S. crude-oil options volatility fell as the underlying futures settled 1 cent lower after data from China and Europe pointed to slower manufacturing.

Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 22.75 percent at 4 p.m. on the New York Mercantile Exchange, down from 23.74 percent yesterday.

West Texas Intermediate oil for June delivery lost 1 cent to settle at $89.18 a barrel on the Nymex.

Futures fluctuated through the day after the release of a preliminary reading of 50.5 for a Purchasing Managers’ Index in China by HSBC Holdings Plc and Markit Economics that was below estimates. In Europe, a composite index based on a survey of purchasing managers held at 46.5 this month, London-based Markit said. A reading below 50 indicates contraction.

A false report of an explosion at the White House from the Associated Press Twitter account caused oil to briefly extend losses and U.S. equities to pare gains before the AP said its account had been hacked.

The most-active options in electronic trading today were June $80 puts, which slid 5 cents to 21 cents a barrel on volume of 4,217 contracts at 3:42 p.m. June $85 puts were the second-most active, dropping 14 cents to 74 cents on volume of 2,073 lots.

Puts, or bets that crude futures will fall, accounted for 53 percent of electronic trading volume.

December $115 calls were the most active options traded in the previous session, with 13,113 contracts changing hands. They gained 2 cents to 32 cents a barrel.

Open interest was highest for June $80 puts with 39,256 contracts. Next were December $105 calls with 35,406 contracts and June $85 puts with 33,264.

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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