Crude Oil Volatility Drops as Futures Slip Less Than 2 Percent

Oil options volatility decreased as the underlying futures slipped less than 0.2 percent after the White House said it was monitoring Iran’s plan to send warships through the Suez Canal.

Implied volatility for at-the-money options expiring in April, a measure of expected price swings in futures and a gauge of options prices, was 27.3 percent as of 4 p.m. in New York, down from 28 percent yesterday.

Oil for March delivery slipped 16 cents to settle at $86.20 a barrel on the New York Mercantile Exchange. Futures have risen 9 percent in the past year.

April $95 calls were the most active options in electronic trading today, with 2,222 lots changing hands. They gained 5 cents to 96 cents a barrel. April $150 calls, the next-most active contract, fell 1 cent to 6 cents a barrel with 2,171 contracts trading. One contract covers 1,000 barrels of oil.

March options expired at the close of Nymex floor trading Feb. 16.

Nymex distributes real-time data for electronic trading and releases information on floor trading, where the bulk of options trading occurs, the next business day.

May $100 calls were the most active options traded yesterday, with 6,621 lots changing hands. They gained 3 cents to $1.27 a barrel. The next-most active option, April $90 calls, increased 28 cents to $2.23 a barrel on 3,873 contracts.

Open interest was highest for April $100 calls with 44,110 contracts. Next were December $100 calls with 39,545 and December $120 calls with 38,146.

(Source: http://www.bloomberg.com/news/2011-02-18/crude-oil-volatility-drops-as-futures-slip-less-than-2-percent.html)