WTI Crude Options Volatility Slips as Futures Gain Slows

Crude call-option volatility fell as West Texas Intermediate futures rallied for a fifth day.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, fell to 16.25 percent at 4:20 p.m. on the New York Mercantile Exchange, down from 17.54 percent yesterday.

WTI for February delivery gained 18 cents to settle at $97.61 a barrel on the Nymex. It was the smallest gain in the five-day advance. The January contract gained the same amount to $97.38, the highest settlement since Oct. 29. Prices have jumped 5.5 percent since Nov. 27.

Puts, or bets that prices would fall, accounted for 58 percent of electronic trading volume as of 4:20 p.m.

“We’re a little overbought after the rally,” said Selo Kraja, senior account executive at Price Futures Group. “Traders are tucking in puts for protection on their long positions.”

Puts protecting against a 10 percent drop in February prices slipped to 21.34 percent from 21.73 percent.

The most-active options were January $95 puts, which fell 11 cents to 34 cents with 5,749 lots trading. January $92 puts, the second-most active, declined 4 cents to 6 cents on volume of 4,126 lots.

In yesterday’s session, of the 179,303 lots traded, puts accounted for 51 percent of the volume. January $100 calls rose 13 cents to 29 cents a barrel on 9,234 contracts. January $91 puts declined 8 cents to 6 cents on volume of 6,220 lots.

Open interest in the previous session was highest for June $80 puts, with 28,976 contracts. Next were January $75 puts with 27,261 lots and June $85 puts with 26,897.

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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