Crude Options Volatility Falls as Oil Declines

West Texas Intermediate crude options volatility fell as futures slid to a four-week low in the largest weekly decline in 19 months.

Implied volatility for at-the-money February WTI options, a measure of expected futures movements and a key gauge of value, was 18.03 percent at 2:56 p.m. on the New York Mercantile Exchange, down from 19.64 percent yesterday. Volatility for calls protecting against a 10 percent rise in futures rose to 19.79 percent from 19.44 percent.

At-the-money volatility sank to 13.02 percent on Dec. 26, the lowest since at least 2006, amid low year-end volume and speculation prices would remain range-bound through the Christmas and New Year’s holidays. Prices yesterday slid 3 percent, falling out of a two-week-old trading range.

WTI February futures declined $1.48, or 1.6 percent, to $93.96 a barrel today on the Nymex, the lowest settlement since Dec. 2. Prices retreated 6.3 percent this week, the biggest decline in 19 months. Trading volume was 9.4 percent above the 100-day average.

Puts accounted for 52 percent of electronic trading volume as of 3:06 p.m. The most active options were February $100 calls, which slipped 9 cents to 5 cents on volume of 4,903 lots. Second-most active were February $99 calls, down 16 cents to 8 cents on 4,746 contracts.

In the previous session, puts accounted for 50.2 percent of trading volume of 162,435. March $90 puts rose 49 cents to 86 cents on volume of 5,266 contracts. February $100 calls declined 47 cents to 14 cents on 5,138 lots.

Open interest was highest for June $80 puts, with 34,221 contracts. Next were June $85 puts with 26,541 lots and March $85 puts with 25,650.

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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