Crude Options Volatility Remains near Highest Level

Crude options volatility remained near its highest level, which it reached last April. Futures closed at a 14 month high. These were attributed to the strong job gains in the US and the unrest in Egypt. Implied volatility for at-the-money options expiring in August, which is a reading of expected price swings in futures and a measure of options, was 24.18 percent. This was down from 24.33 percent on July 3. Crude

West Texas Intermediate crude for August delivery gained $1.98 to $103.22 per barrel on the New York Mercantile Exchange. This was the highest settlement since May 2012. Volatility has increased from 19.7 percent on June 28 as crude rose 6.9 percent, which was the biggest weekly advance since February 2011.

Crude increased as the US added more jobs than the estimates made by economists. It was also affected by the concerns regarding the disruption of supplies due to the political turmoil in Egypt, where security forces and Islamist supporters of former President Mohamed Morsi resulted to five dead and 20 wounded. Morsi was Egypt’s first elected president who was deposed by the military last July 3.

August $120 calls were the most-active options in electronic trading. They increased 2 cents to 7 cents per barrel on trading volume of 4,602 lots. August $115 calls were second. They gained 5 cents to 15 cents per barrel on volume of 4,151 contracts.

Calls accounted for 63 percent of electronic trading volume and were the four most actively traded contracts. In the past session, bullish bests accounted for 54 percent of 256,003 contracts traded.

September $90 puts were the most active options last July 3, with 11,283 contracts traded and remained at 49 cents per barrel. August $110 calls increased 15 cents to 21 cents on 10,160 lots. September $85 puts got its highest interest with 39,065 contracts.