Crude Options Volatility Falls as Supply Drop Boosts Futures

Crude options volatility fell when underlying futures advanced after a report that inventories at a key U.S. delivery hub slid to the lowest level this year.

At-the-money volatility for October options, a measure of expected futures swings and a key gauge of value, was 24.84 percent at 3:35 p.m., down from 27.8 percent yesterday.

West Texas Intermediate crude for October delivery rose $1.14, or 1.1 percent, to settle at $108.37 a barrel on the Nymex. Futures advanced as the Energy Information Administration reported that inventories in Cushing, Oklahoma, delivery point for the Nymex contract fell 1.83 million barrels last week to 34.8 million, the lowest level since February 2012.

Volatility for calls protecting against a 10 percent rise in October futures dropped to 31.42 percent from 32.85 percent. Volatility for puts covering a 10 percent drop declined to 29.33 percent from 30.66 percent yesterday.

The most active options in electronic trading today were November $140 calls, which rose 1 cent to 12 cents a barrel with 3,272 lots trading as of 3:43 p.m. December 2014 $110 calls were the second-most active, rising 6 cents to $2.36 a barrel on volume of 2,597 contracts.

Calls and puts were almost evenly split in electronic trading at 4:34 p.m. In the previous session, calls made up 55 percent of the 91,659 lots traded.

March $85 puts were the most-active options yesterday with 4,601 contracts changing hands as they rose 2 cents to $1.60 a barrel. November $140 calls, the next-most active, declined 1 cent to 11 cents on 4,576 lots.

Open interest was highest for December $80 puts, with 40,597 contracts. Next were December $90 puts with 37,043 lots and December $105 calls with 34,815.

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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