Crude Options Volatility Lowest Since at Least 2006 as WTI FallsEliot Caroom
Crude options volatility fell to the lowest level since at least 2006 as West Texas Intermediate futures declined.
Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, slipped to 13.35 percent on the New York Mercantile Exchange as of 3:40 p.m., down from 14 percent Dec. 20. That’s the least in data compiled by Bloomberg.
WTI for February delivery slid 41 cents to settle at $98.91 a barrel on the Nymex. Volatility for domestic crude options has fallen to historic lows as surging domestic output boosts inventories and provides a buffer against disruptions.
Puts, or bets that prices would drop, accounted for 66 percent of electronic trading volume as of 3:50 p.m. The most-active options were February $90 puts, which declined 2 cents to 5 cents with 3,266 lots trading. February $94 puts, the second most active, were unchanged on volume of 1,953 lots.
In the previous session, puts accounted for 52 percent of the 48,808 lots traded. April $65 puts were unchanged at 2 cents on volume of 3,525 contracts. December $150 calls held at 8 cents with 2,500 lots changing hands.
Open interest was highest for June $80 puts, with 34,032 contracts. Next were June $85 puts with 26,470 lots and December $120 calls with 25,369.
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.