Crude Options Volatility Rises as Futures Trade in $2 RangeBarbara Powell
Crude options volatility rose as futures traded in a $2 range for a third day, awaiting the outcome of a Federal Reserve policy meeting that ends July 31.
Implied volatility for at-the-money options expiring in September, a measure of expected price swings in futures and a gauge of options value, was 21.4 percent on the New York Mercantile Exchange at 2:05 p.m., from 21.03 percent July 26.
“We’ve got into a new range,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The market can’t make a decision on what its next move is going to be until it knows what the Fed is going to do.”
West Texas Intermediate crude for September delivery slipped 19 cents to $104.51 a barrel on the Nymex, and traded today between $103.87 and $105.87.
The Fed is expected to announce at the end of its two-day meeting whether it intends to reduce the scale of its $85 billion in bond purchases or leave the program unchanged.
The most active options in electronic trading today were September $93 puts, which fell 4 cents to 5 cents a barrel on volume of 2,657 lots traded as of 2:12 p.m. September $110 calls were the second-most active, dropping 8 cents to 26 cents on volume of 2,073 contracts.
Puts accounted for 63 percent of electronic trading volume. In the prior session, bearish bets made up 53 percent of 76,921 contracts exchanged.
September $100 puts were the most-active options July 26 with 4,619 contracts changing hands as they increased 3 cents to 63 cents a barrel. September $95 puts declined 1 cent to 15 cents on 3,933 lots.
Open interest was highest for December $80 puts, with 38,626 contracts. Next were December $90 puts with 37,786 lots and December $70 puts with 35,002.
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.